Surcharges Mascidon LLC, 248-568-0418

Surcharges

Raw materials are often subject to surcharges. For instance, copper raw materials may be purchased

from a vendor at a blanket rate of $4.50 per pound based on the price of copper at the time a contract is

signed. This is the ‘base’ price. When copper rises to $5.00 per pound, the vendor would be paid at the

base price for the copper product, and paid a surcharge of $5.00 - $4.50 = $0.50 per pound. If copper

fell to $4.20 per pound, then the vendor would be paid at the base price for the copper product, and a

credit would be taken for $0.30 per pound.

The products manufactured and sold to customers could in turn be subject to similar surcharges. This is

more complex however since a finished good product could have one or more components subject to a

vendor surcharge and the ‘formula’ for calculating the surcharge is negotiated with the customer. It

gets complicated if the finished good is composed of different materials and each of these materials is

subject to a surcharge. For instance, let’s assume that a finished good has copper and gold as primary

components with surcharges. Then the surcharge on the finished good is made up of two separate

surcharges – one for the copper and one for the gold components. Figure 1.1 shows a sales order with

two component surcharges applied against the main item ordered – 491610. The ‘free text’ description

shows the name of the component and the finished goods to which the surcharge has been applied.

Figure 1.1 Item Surcharges from Components of Customer Ordered Items

Customer Side Surcharges

Two methods of applying surcharges are supported. The first method is to simply include the

surcharges for any component materials in the price to the customer. This is maintained using the

special prices with SAP Business One. The first step is to define the surcharge type in the Business Part

Catalog file as shown in Figure 1.2. This shows that the item 481610 for customer C40000 is subject to a

surcharge and that the surcharge is applied to the ‘FG Only’ (type 1).

Surcharges Mascidon LLC, 248-568-0418

Figure 1.2 Defining the Customer Surcharge as ‘Apply to FG Only’

With this definition in place, the surcharge price for the finished good item can be added in the Special

Prices by Business Partner in SAP. A review of the special pricing as shown in Figure 1.3 shows that the

price for the item 481610 is set at $12.80 for the period 01/02/11 through 03/31/11. If a sales order is

entered for this item this is the expected price – and it is shown in Figure 1.4.

Figure 1.3 Defining the Finished Goods Price

The pricing can be extended further by clicking on row 2 of the period discounts and entering a quantity

break. When handling surcharges in this manner, all of the details for pricing are maintained in the

special prices tables. The price at any given time is available for review. If there are any questions as to

how or when the prices were set, the SAP change log function can be used to determine when the price

tables were changed and by whom.

The second method for applying surcharges to finished goods is to maintain normal pricing for the

finished good and have the sales orders and invoices show the surcharges for the components of the

Surcharges Mascidon LLC, 248-568-0418

finished goods that are subject to surcharges. Figure 1.1 shows the end result of this type of surcharge

with two line items, both with the heading ‘Surcharge’ showing the surcharge amounts for the

component items. In this instance, the surcharge amounts are the incremental costs to add to the

charge for the product. For instance, the steel has a surcharge of $0.49 / pound. Since the order calls

for 120 pieces of 491610, which in turn means that 42 pounds of steel are required, the surcharge for

the steel is 42 x $0.48 = $20.58. To set up this type of surcharge, the following steps are required: A. The

finished goods item defaults to the price for this item – customer using standard SAP B1 pricing. B. In

the special prices for the item SR131-14 (a component of 491610), the incremental surcharge for the

steel is entered. Figure 1.4 shows this entry.

Figure 1.4 Defining the Incremental Surcharge for Steel

Referring to this pricing, the quantity of 10 – 50 pounds results in a price of $0.49 as the incremental

surcharge for steel. Quantity breaks are not required. Once again the prices are maintained with dates

so that the surcharges in effect are available at all times.

Surcharges Mascidon LLC, 248-568-0418

Regardless of the method used for the surcharge, the price of the surcharge is based on the document

date of the order. The price then flows from the sales order to the delivery order to the invoice. If the

surcharge price needs to be re-adjusted to the prices effective on the date of the invoice rather than the

sales order creation date, then formatted searches need to be attached to the invoice screen to force

the recalculation of the surcharge prices effective on that date. These formatted searches are provided

but not implemented unless required.

Vendor Side Surcharges

For vendor surcharges, the surcharge price is incorporated directly into the purchase order. This is

based on special pricing entries for the vendor – item combination. In order to implement the vendor

surcharges, the business partner catalog file must include the flags for the vendor surcharge by item

commodity. Figure 1.5 shows this for the commodity ‘COPPER’ and the vendor V1010.

Figure 1.5 Item – Vendor Flagged as Subject to Surcharge

With this defined, the special prices for the items by vendor are INDIRECTLY used to create a date based

vendor surcharge. This can be defined down to the quantity break level. Figure 1.6 shows the

commodity code associated with item SR131-14 – COPPER in this instance. Figure 1.7 shows the setup

of the special pricing for the non inventoried item ‘COPPER’. Referring to this screen, the price is set at

$4.56. The quantity break pricing could also be used.

When the item SR131-14 is entered as a PO item for a vendor that utilizes surcharges, the formatted

search will look at the commodity code for this part and see ‘COPPER’. Then the system will use the

inventory item ‘COPPER’ to retrieve the special pricing for this vendor. This is the surcharge price for

this commodity. By utilizing the ‘commodity’ of the item rather than the individual item, all items

assigned the commodity ‘COPPER’ can have the surcharge maintained by simply creating special pricing

for the ‘COPPER’ item. For instance if 20 different gauges of copper were purchased that were all

subject to the same surcharge, this would require the definition of one surcharge price record rather

than 20.

Surcharges Mascidon LLC, 248-568-0418

Figure 1.6 Commodity Code Associated with an Item Subject to Surcharges

Figure 1.7 COPPER Item Special Pricing

Using the special prices maintains a history of the surcharge prices by vendor – item – date range. New

purchase orders to this vendor will also automatically pick up the price that is currently active – based

Surcharges Mascidon LLC, 248-568-0418

on the date range. This means that if the purchase order is entered and the current active price is $4.80,

then this will also be the receipt price when the goods are received – even if it is 30 days later. Normally

vendor surcharges are based on the receipt date rather than the PO date. A formatted search has been

added to the PO goods receipt screen to retrieve the surcharge price in effect at the time of receipt.

When the PO goods receipt is created from the PO, the price used is the surcharge price currently in

effect. In some instances vendors may apply the surcharge based on the date of the A/P invoice rather

than the date of the receipt. This is a contractual agreement. If this is the case, a similar formatted

search is available to pull the then current surcharge price into the A/P invoice at the time it is created.

Features:

• Customer side surcharges are supported

o Special pricing by item – customer is one method to maintain surcharges for customers

o Customer items surcharges can inherit surcharges from their components and have

these appear as separate line items on the sales documents

o Tracking of the surcharge pricing in effect over time is provided

o Adjustment of the surcharges in effect from sales order date to delivery date is provided

o Items subject to surcharges are flagged in the customer – part catalog table

o A Crystal report of surcharges is provided

• Vendor side surcharges are supported

o Items subject to surcharge have surcharges maintained by ‘commodity’

o A commodity item such as COPPER is created as an inventory item

o Special pricing by commodity item (i.e. COPPER) – customer is used to maintain

surcharges for vendors

o Tracking of the surcharge pricing in effect over time is provided

o Adjustment of the surcharges in effect from purchase order date to A/P invoice date is

provided

� For example a new surcharge may be calculated for the PO Goods Receipt based

on surcharge information available at the time of the receipt

o Items subject to surcharges are flagged in the vendor– part catalog table

o A Crystal report of surcharges is provided