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Purchase price variance / cost tier adjustment

John Pia Jr
- 10/05/2016 13:38:57


I am trying to figure out how to manage cost tier adjustments, also known as purchase price variance.

Purchase order created for 10 widgets valued at $10 per widget.

10 widgets are received. At this time the value of my inventory goes up by $100.

A week later we received the invoice and see that the widgets were only $9 each

Before I validate the invoice I would like to change the cost to $9 per widget bringing my invoice total down to $90.

Once I validate the invoice I need the inventory value to be adjusted from $100, down to $90 I also need to make the adjustment on record in my purchase variance account.

Basically I need to create a journal entry to the inventory account if there is a price variance between the original purchase order and the invoice price.

I believe this is a fairly common task.

Would this be handled with a return?