Intersite Transfers/Multi-Site Component Issues

The same item used at different sites can have a different GL cost per site. When inventory is moved between sites, the movement is accounted for either through the Transfer Clearing account (for transfers within the same entity) or through the Intercompany account (for transfers between different entities). Differences in costs at sites in the same entity are posted to the Transfer Variance account for the site using Site Maintenance (1.1.13); differences in costs at sites in different entities are posted to the Material Rate Variance account.

Transfers between sites in different entities are tracked using the Cross-Company Inventory Control account defined for the domain and the intercompany codes of the appropriate entities.

Set Balanced Entities to Yes using General Ledger Control (25.24). If Balanced Entities is Yes, the system automatically creates intercompany balancing entries

Note: On a work order component issue, rather than report differences in cost between two sites to the Transfer Variance account, differences are reported to the work order, crediting the Material Rate Variance account.

Example: Transfer 1,000 expendable containers item 9099 from site 10-200, where the GL standard cost of the item is 2.50, to site 10-100 where the item has a GL standard cost of 1.00.

The Transactions Detail Inquiry (3.21.1) shows the accounts affected by the inventory transfer.

There is only one GL transaction at the Issuing site.

• The components are issued from Inventory (credit Inventory 1500) at the standard GL cost of the 2,500.00, and rather than putting them directly into inventory at the receiving site, the system debits then 2,500.00, to the transfer clearing account (1670).

Next, the items are transferred to the books at the receiving site. Because inventory transactions generate “matched pairs” of transactions, the following two transactions will be generated even if costs at the respective sites are identical.

• The intersite transfer is recorded (credit transfer clearing, 1670, 2500.00). Because we do not know yet if the costs are the same, the entire standard GL cost at the sending site is booked to Transfer Variance Account (debit Transfer variance 6820, 2500.00).

• The same items are put into inventory at the receiving site at the standard GL cost at that site. (debit inventory, 1500, 1,000.00) The offsetting entry is to Transfer Variance (credit 6820, 1,000). When the GL standard costs are different, the difference ends up in this account.

• In this example, the total value of inventory is revalued downwards, thus generating a debit (unfavorable) variance

This transaction points out the disadvantage of moving inventory from a high cost site to a low cost site. Any variance accrues to the receiving site.

It is possible to issue items to a work order from a non standard site. In the graphic the work order for 100 of the 50010 acoustic transducer requires 600 of the 60012 electrode. The work order is released at site 10-100 and all components are expected to be issued from site 10-100. However a shortage is discovered and inquiry reveals the required items at site 10-200, which site agrees to supply the electrodes. The site 10-100 cost of the electrode is 0.15 and the cost at site 10-200 is 0.20. In this case the system atomically generates several inventory transactions.

As seen in the previous example the system generates the material issue from the supply site the material receipt at the demand site and then the work order issue. The detail of the transactions are shown on the next graphic.

In the issue step, the 60012’s are credited to inventory (1500) at the GL cost of site 10-200, 120.00 and debited to transfer clearing 1670.

Then received at site 10-100 with a debit to transfer variance (5820) of the 120.00 and a credit to transfer clearing (1670). Then a debit to inventory (1500) at the site 10-100 cost of 90.00 and a credit to transfer variance (6820).

The items are then issued to work in process with a debit to WIP (1550) at the site 10-100 GL cost of 90.00 and a credit to inventory (1500).

This leaves a balance of 120-90 = 30 in the transfer variance account which accrues to the receiving site. As it is a positive number it is unfavorable.