Example of inventory purchase cost allocation to calculate the stock value per unit according to PSAK 14 in Orlansoft ERP

For companies that import materials to process production or goods for sale, a Purchasing Cost allocation process is required to speed up the inventory value calculation per unit. Therefore, automatic, fast, and accurate Purchase Cost Allocation is needed to be available in the ERP System when a company has:

• Purchase order transactions contain many imported product items, especially if each product has a different order quantity and price per unit.
• Import activities for the same product items with high frequency in one period.
• The fluctuating purchase prices or foreign currency exchange rates cause the purchase price per unit of imported items to have a value that often changes in each transaction.

Quote from PSAK 14 paragraph 10 regarding Inventory Costs and paragraph 11 regarding Purchase Costs:

Inventory Cost
10. Inventory costs consist of all purchase, conversion, and other costs incurred until the inventories are in their present condition and location.

Purchase Cost
11. The cost of purchasing inventories includes the purchase price, import duties, other taxes (other than those which the entity can collect later on from the tax authorities), transportation costs, handling costs, and other costs directly attributable to the acquisition of finished goods, materials, and services. Trade discounts, rebates, and other similar items are deducted in determining the purchase cost.

Referring to PSAK 14 quote above. Purchase costs often include import duties, VAT on luxury goods, custom clearance services, transportation charges, and insurance costs. However, income tax article 22 and Import VAT are not Purchase Costs because these two types of taxes are creditable (refundable to the Tax Office).

Example A:
Stock item A01 per February 1 = 100 units @ Rp. 40,000. Goods Receipt Note No. GR0701 for item A01 on February 5, amounting to 500 units @ USD 2 at an exchange rate of Rp. 15,000/USD = Rp. 15,000,000. The invoice for Purchase Cost received on February 25 for transaction GR0701 consists of the following:

The value of the Purchase Cost should be allocated in the same month as the goods receipt transaction to smooth the monthly accounting period closing process. The Purchase Cost can be the actual transaction value or the estimated value at the end of the month. It is better to avoid having Purchase Cost transactions in the current month allocated to goods receipt transactions in the previous months because the ERP System will usually allocate the Purchase Cost to item products that still have a quantity balance in the current month.

The selected Inventory Valuation Method should preferably be a Moving Weighted Average or Monthly Average to facilitate the allocation of Purchase Costs to each product item each month.
From example A above, the Purchase Cost per unit of item A = Rp. 6,150,000 / 500 units = Rp. 12,300. The total price per unit for item A in transaction GR0701 becomes = ( Rp. 15,000,000 + Rp. 6,150,000 ) / 500 units = Rp. 42,300. The average price of item A becomes = (Rp. 40,000 x 100 units) + (Rp. 42,300 x 500 units) / (100 units + 500 units) = Rp. 41,917 per unit.

Orlansoft Purchase Shipping Cost makes it easy for end-users to allocate each purchase cost automatically and proportionally to each product item in one or several Receiving transactions based on quantity, value, weight, volume, or specific line transaction weights. In addition, each type of Purchase Cost can have a separate item ID of purchase shipping cost.

Purchase Shipping Costs (such as Freight) billed by the same supplier as the supplier of material items or goods can use a trailer line in one Purchase Order transaction. In addition, for Purchase Shipping costs billed by different suppliers (such as taxes and custom clearance services), the end-user can create Purchase Invoice transactions with line item GL Group type = Purchase Shipping Cost.

Orlansoft Exchange Rate Period makes it easy to determine the exchange rate for the value of inventory received in Receiving transactions and Purchase Invoice transactions for each type of Purchase Cost transaction, so transactions in foreign currencies will be converted to Home currency 1 and 2 automatically.