In this example, the quantity being protected is set to -1 (indicating that the system should protect the current on hand quantity for the item).
In this case, the vendor is protecting the AP3000 item and the new vendor price for the item is 200.00 USD.
Local Currency Line
|
Div |
Vendor Name |
GL ID |
Item# |
New LC Price |
Qty |
Text Note |
|
1 |
Bay Area Systems |
PP001 |
AP3000 |
200.00 |
-1 |
Text to be added to comment |
Foreign Currency Line
|
Currency |
Vendor Name |
GL ID |
Item# |
FC Price |
|
CAD |
Bay Area Systems |
PP001 |
AP3000 |
318.75 |
If the above price protection transactions are processed when there are 10 units of the item on hand, local currency is USD and the current cost of the item is 215.0000, the system would do the following.
• The system calculates the total on hand quantity for the item in the inventory locations within the specified division (10 units).
• The system calculates the total value of the item across all locations (10 units multiplied by 215.0000 or 2150.0000).
• The system uses the on hand quantity calculated in the first step and the difference between the current item cost and the new local currency cost to determine the change to inventory and the new average cost for the item.. 10 units * 15.0000 or 150.0000 is the change to the on hand inventory value. 2150.0000 (the total value on hand) – 115.0000 (the change to the inventory value) is 2000.0000. 2000.0000 /10 units (on hand quantity) is used to calculate the new average cost for the item – which is 200.0000
• The system updates the average cost of the items in the locations being processed (the new cost is 200.0000 in this case). The system also updates the Next Cost in the Catalog and Inventory records for the item to 200.00 and it writes data change records to record the change.
• The system writes inventory activity records with a type of PP (Price Protection). These records store the prior and new cost for the item in each location and the quantity on hand in each location when the transaction was processed. The system also uses the inventory transaction records to write a journal entry for the transaction. The journal entry is made to the Price Protection Receivable Account, and to the Inventory Control Account and the Cost of Sales Account defined in the Product Line that the inventory item is assigned to. The journal entry amounts are based on the following logic.
Price Protection Receivable – the total difference between the old (current average cost) and the new protected price from the vendor multiplied by the total number of units being protected. In the above example, this would be 10 units * 15.0000 or 150.0000
Inventory – The total quantity on hand in the current division when the transaction is processed, multiplied by the total difference between the old (current average cost) and the new local currency price for the vendor. In this case, the on hand quantity of 10 is equal to the quantity protected so 10*15.0000 or 115.0000 is the effect on the on hand inventory and the amount that is posted to the control account.
Cost of Sales – The total quantity protected (10) less the total quantity on hand (10) multiplied by the change in cost of 15.0000 is 0 In this example, the system is being told to adjust only the current on hand, so there will be no posting to cost of sales.
The total journal entry (rounded to 2 decimals) would be
Price Protection Receivable 115.00
Inventory 115.00
• The system checks for any open local currency PO lines for the vendor and item being processed. If it finds any open records, the system updates the PO price with the new protected vendor cost (200 in this case) and it writes a Data Change record for the change to each PO line.
• If a foreign currency and foreign currency price has been specified in the input file, the system checks for any open purchase order lines and any QVL records for the vendor and item being processed that are in the specified currency. If found, the system updates the records with the specified foreign currency price and it writes data change records to record the modifications. This ensures that future purchase orders and purchase order receipts that are processed in that currency use the correct vendor price information.