---
title: "Understanding Purchase Order Added Costs"
canonical: "https://kb.myframeworks.com.au/space/FRAM/53149736/Understanding%20Purchase%20Order%20Added%20Costs"
format: markdown
---
Managing additional costs like freight, handling charges, and minimum order fees is essential for accurate purchase costing and profitability analysis. The **Purchase Order **(**PO) Added Costs **function in Frameworks automatically calculates and applies these supplementary charges to purchase orders, ensuring your true cost of goods is captured from the moment you place an order through to final receipt and invoicing.

> ⚠️ The Added Costs feature requires **Purchase Supervisor** authority for configuration and maintenance of cost rules.

> **Use Case Example:**
> 
> Your business regularly orders building supplies from a key supplier who charges a $50 freight fee for orders under $500, plus a 2% handling charge on all timber products. Instead of manually calculating and adding these costs to each purchase order, you configure Added Costs rules that automatically apply the freight charge when the order total is below $500 and the handling charge to any timber products. When your purchasing team creates a $350 order containing timber beams, Frameworks automatically adds the $50 freight charge and calculates the 2% handling fee on the timber items. This ensures accurate costing from order creation through to receipt, giving you precise inventory valuations and cost reporting without manual intervention.

# PO Added Costs Explained

Unlike manual cost entry, the PO Added Costs function automatically evaluates each purchase order against your configured rules and applies relevant charges immediately upon PO creation or modification. This ensures consistent application of supplier charges and eliminates the risk of forgotten fees that can impact profitability.

Frameworks distinguishes between different types of additional costs and applies them using various calculation methods to match real-world supplier charging structures.

## Key Cost Calculation Methods

### 1. Percentage Method

Calculates the added cost as a percentage of the order value or specific product group total. Ideal for handling charges, markup fees, or commission-based costs.

### 2. Total Method

Applies a fixed dollar amount to the entire order or per delivery. Perfect for freight charges, minimum order fees, or flat-rate services.

### 3. Weight-Based Methods (per KG, per M3, per Cubic Volume)

Calculates costs based on physical characteristics of the products. Essential for freight calculations based on weight or volume, especially useful for timber and bulk materials.

# Purchase Order Workflow Details

The PO Added Costs functionality integrates seamlessly with your existing purchase order processes while providing enhanced cost accuracy and automation.

## Automatic Cost Application

When creating purchase orders, Frameworks evaluates configured cost rules and automatically applies matching charges based on supplier, product groups, and order characteristics. This occurs immediately upon order creation and recalculates whenever order lines are modified.

| Scenario | Business Impact | Frameworks Behaviour |
| --- | --- | --- |
| Order below minimum threshold | Minimum order charges apply automatically | Adds configured flat fee to order total |
| Multiple product groups in order | Different cost rules for each product group | Applies specific charges per product group |
| Partial order receipts | Costs allocated proportionally | Pro-rata allocation unless configured per delivery or if the Method is Total |
| Order modifications | Cost recalculation required | Automatic recalculation of all applicable charges |

## Cost Application Priority

When multiple cost rules could apply to the same order line, Frameworks uses a specificity-based matching system. More specific rules (those matching exact supplier, product group, and sub-group combinations) take precedence over general rules, ensuring accurate charge application even in complex scenarios.

# Configuration Requirements

Setting up Added Costs requires establishing both master cost codes and specific application rules that match your supplier agreements and business processes.

> ✅ Refer to [https://sterlandsupport.atlassian.net/wiki/spaces/FRAM/pages/72744978](https://sterlandsupport.atlassian.net/wiki/spaces/FRAM/pages/72744978) for more information

# Receipt and GL Processing Details

Added Costs integrate with your inventory costing method and creditors ledger to ensure accurate financial reporting and inventory valuations.

## Standard Costing Integration

Under standard costing, added costs post to designated GL accounts immediately upon receipt, with purchase price variances captured separately. This maintains standard cost integrity while accurately recording total acquisition costs.

## Average Costing Integration

With average costing, added costs are incorporated into the actual product cost and used to recalculate average costs. This ensures your inventory valuations reflect true acquisition costs including all supplementary charges.

## Subcontractor Receipt Processing

When added costs involve subcontractors (such as freight companies), the system automatically creates separate receipt transactions for each subcontractor supplier. This enables proper creditors ledger management and ensures accurate tracking of third-party charges.

# Additional Information

> ✅ Refer to [https://sterlandsupport.atlassian.net/wiki/spaces/FRAM/pages/104693762](https://sterlandsupport.atlassian.net/wiki/spaces/FRAM/pages/104693762) and [https://sterlandsupport.atlassian.net/wiki/spaces/FRAM/pages/104759302](https://sterlandsupport.atlassian.net/wiki/spaces/FRAM/pages/104759302) for detailed field descriptions.
> ✅ 
> ✅ Refer to [https://sterlandsupport.atlassian.net/wiki/spaces/FRAM/pages/72744978](https://sterlandsupport.atlassian.net/wiki/spaces/FRAM/pages/72744978) for comprehensive configuration instructions.