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I would appreciate your input of the issue at hand. I support MM users in and Oil & Gas downstream company.
Purchase Orders are created using price estimates. The price of oil products fluctuates and we usually cannot get the exact price at the point of creation of the PO.
We use Moving Average Price (MAP) for stock valuation and so the price & quantity in the PO affects the moving average price.
We use price estimates to create the PO but when we receive the final price for the oil products from the Supplier, most times there is a significant difference between the estimated price and the final price. Usually, at this point, we have completed all goods receipts and goods issues against the PO and are unable to make changes.
We have an issue posting the invoice because the invoice value is significantly higher than the PO value. We also have an issue with the moving average price because it is understated as a result of this.
To reiterate, this is a summary of the issue:
At the point if PO creation ; Quantity = 10, 000 MT Price = $650
Later when final price is available; Quantity = 10, 000 MT Price = $715
Any advise on how to treat this issue, please? Your assistance will be truly appreciated.