Entries in the Receiving Warehouse

Now, consider the entries in the receiving warehouse.

Assume that the receiving warehouse normally pays $55 per unit to the sending warehouse, and incurs an additional $2 freight in shipping the inventory.  You should define a $55 acquisition cost and a $2 non-acquisition cost for the item, for a total standard cost of $57 per unit.  This results in the following entries:

Occasionally, this warehouse may have to obtain inventory from another distribution warehouse, where the inventory is also valued at $57 per unit.  This scenario results in a Transfer Price Variance to the sending warehouse:

Note:    Inventory Accounting will always credit the non-acquisition freight cost to the corresponding account as defined on the Reference File.  However, if you do not wish to charge freight, you may assign the same account number to the freight charge and the transfer price variance entry for transfers between these two warehouses.  This would result in offsetting entries, with a net value of zero.