ANS-0666 · INVENTORY & ITEM MANAGEMENT
How NetSuite’s ‘Use Item Cost as Transfer Cost’ Affects Inventory Costs
This guide clarifies how NetSuite handles item costs for transfer orders when the 'Use Item Cost as Transfer Cost' preference is enabled, and explains default values for inventory adjustments and worksheets.
Short answer
When 'Use Item Cost as Transfer Cost' is active, the item's actual cost (e.g., average or standard) is used for cost accounting upon fulfillment and receipt, while the transfer price acts as a declared shipping value. Inventory adjustments default to current average cost for negative changes, and last purchase price or average cost for positive changes.
Scenario
NetSuite users often seek to understand the precise financial implications when the 'Use Item Cost as Transfer Cost' preference is enabled for transfer orders. Additionally, questions arise regarding the default value behavior for inventory worksheets and inventory adjustments, particularly when no explicit value is provided during these transactions.
Solution
When the 'Use Item Cost as Transfer Cost' preference is activated in NetSuite, the following behaviors are observed:
The Transfer Price field on the transfer order will still default to the Transfer Price defined on the item record.
The amount of the transfer order is also initially set to this Transfer Price.
However, when the transfer order is fulfilled and received, the transfer price from the item is not used for cost accounting. Instead, the item's cost (e.g., average or standard cost) is used, and the transfer price serves solely as a declared shipping value.
NetSuite supports various costing methods, including FIFO, LIFO, Average Cost, Standard Costing, Specific Identification, and Lot Numbered costing.
For inventory worksheets, the value defaults to the Average Cost for the specific location. If no value exists as of the inventory worksheet date, it defaults to the Purchase Price.
For inventory adjustments, the value also defaults to the Average Cost for the location. If no value is provided for an inventory adjustment, it defaults to the current average cost for negative adjustments, and to the last purchase price or current average cost if not explicitly supplied for positive adjustments.
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