Assign item charges to subcontracting receipts

Note

This early access feature is available only to Business Central partners who have a Dynamics 365 Business Central Partner Sandbox license and are located in the United States, United Kingdom, or Germany. Over time, availability will expand to include more countries/regions.

Early access features aren’t meant for production use and might have restricted functionality. These features are subject to supplemental terms of use, and are available before an official release so that partners can get early access and provide feedback.

Learn more about partner sandboxes at Production and Sandbox Environments - Business Central.

Learn more about early access previews at Prepare for Major Updates with Preview Environments - Business Central.

You can assign item charges to subcontracting receipts to include costs such as transport, packaging, and other incidental expenses directly in your production order costs. When you post additional costs that should be distributed to subcontracting receipts, you can record them as a separate invoice with Type set to Charge (Item). The item charges link to the capacity ledger entries of the production order.

How item charges work with subcontracting

When you assign item charges to subcontracting receipts, Business Central creates value entries differently than for standard item charges.

Standard item charge assignment

When you assign item charges to regular purchase receipts, Business Central creates value entries that:

• Reference item ledger entries.
• Use Direct Cost as the cost type.
• Affect inventory.

Subcontracting item charge assignment

When you assign item charges to subcontracting receipts, Business Central creates value entries that:

• Don't reference item ledger entries.
• Reference capacity ledger entries.
• Use Direct Cost as the cost type.
• Use Production as the order type.
• Have an invoiced quantity of 0 because the costs are capacity costs.

Assign item charges to subcontracting receipts

Before you assign item charges to a subcontracting receipt, the following must be in place:

• A posted subcontracting purchase order.
• A purchase receipt with a subcontracting reference.

The following steps describe how to assign an item charge to a subcontracting receipt.

1. Choose the icon, enter Purchase Orders or Purchase Invoices, and then choose the related link.

2. Create a new purchase order or invoice.

3. On the lines, in the Type field, choose Charge (Item).

4. Fill in the remaining fields on the line, such as the item charge, quantity, and unit cost. Hover over a field to read a short description.

5. Choose the Item Charge Assignment action.

6. On the Item Charge Assignment page, choose the Get Receipt Lines action.

   The receipt lines include subcontracting receipts. You can identify them by the Prod. Order No. column.

7. Select the subcontracting receipt line, and then enter the quantity and amount to assign.

8. Close the Item Charge Assignment page.

9. Post the purchase order or invoice.

Business Central creates the value entries and links them to the capacity ledger entries.

Identify subcontracting receipt lines

When you use the Get Receipt Lines action, the list includes both regular and subcontracting receipt lines. To distinguish subcontracting receipts, the following columns are available on the Purch. Receipt Lines page:

• Prod. Order No. (visible by default)
• Routing No.
• Operation No.
• Work Center No.

Subcontracting receipt lines have values in these fields. You can use them to filter or sort the list.

Value entries for subcontracting item charges

When you post an item charge assigned to a subcontracting receipt, Business Central creates value entries with the following characteristics:

Field	Value
Item Ledger Entry No.	0 (empty)
Capacity Ledger Entry No.	Reference to the capacity ledger entry
Order Type	Production
Order No.	Production order number
Invoiced Quantity	0
Cost Type	Direct Cost

The costs are assigned directly to the production order and don't affect item inventories.

Differences from standard item charges

The following table describes the differences between standard item charges and subcontracting item charges.

Aspect	Standard item charge	Subcontracting item charge
Item Ledger Entry No.	Filled	0 (empty)
Capacity Ledger Entry No.	0 (empty)	Filled
Order Type	Purchase	Production
Inventory impact	Yes	No
Cost distribution	Item	Capacity/Production order

Benefits of assigning item charges to subcontracting

Assigning item charges to subcontracting receipts offers the following benefits:

• More accurate cost assignment - Costs are assigned directly to production orders rather than to items.
• Better cost separation - Manufacturing costs are separated from material costs.
• Improved calculation - Manufacturing cost calculations are more precise.
• Better reporting - You can analyze subcontracting costs separately from item costs.
• Better traceability - You can track the total cost of subcontracting more easily.

Examples

The following examples show how you can use item charges with subcontracting.

Example 1: Transport costs

A subcontracting invoice includes 1,000 EUR for processing and 50 EUR for transport. You assign the transport costs as an item charge to the subcontracting receipt.

Example 2: Packaging costs

Special packaging for sensitive parts costs 30 EUR in addition to 800 EUR for processing. You assign the packaging costs as an item charge for direct assignment to manufacturing costs.

Example 3: Testing costs

Quality testing at the subcontractor costs 100 EUR in addition to 1,200 EUR for processing. You assign the testing costs as an item charge for better cost transparency.

Things to consider

Keep the following in mind when you work with item charges for subcontracting:

• After you post an item charge to a subcontracting receipt, you can't reverse it.
• Make sure that you assign the item charge to the correct subcontracting receipt because the assignment affects cost distribution.
• Without the Subcontracting app, standard Business Central doesn't support assigning item charges to purchase receipts for subcontracting operations. If you try to assign charges to a receipt line with a work center, you get an error. The Subcontracting app removes this limitation and routes the charges to capacity ledger entries instead of item ledger entries.

Verify postings

To verify that Business Central posted item charges correctly, check the value entries.

1. Choose the icon, enter Value Entries, and then choose the related link.
2. Filter the entries by the production order number.
3. Filter by Cost Type set to Direct Cost.
4. Verify that the Capacity Ledger Entry No. field is filled and the Item Ledger Entry No. field is empty.

The item charge costs appear in the production order cost overview under capacity costs.

Related information

Manufacturing
Setting Up Manufacturing
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