About Amortization

[Former Member]

Dear All,

I have some questions related to amotization, for which I am unable to get much information from threads.

Please give suggestion on the same.

1. In my company we are adding the "Amortization" value with the basic price. But the client used to pay the amount to us for tools, that needs to be deducted from the basic price. Is my understanding correct?

2. How to identify whether we have reached the amortization amount given by the client?

3. Is amortization value considered for excise duty base value?

Please give your suggestion.

Regards,

Mullairaja

[Lakshmipathi · Accepted solution]

1. In my company we are adding the "Amortization" value with the 
      basic price. But the client used to pay the amount to us for tools, 
       that needs to be deducted from the basic price. Is my understanding correct?

Amortization can be collected in two ways. One is 100% in advance before developing the tooling and another method is to increase the selling price to the extent of tool cost value.

For example, if customer release an order for 1000 nos. of material A. Selling price of this material A is Rs.100 and the tool cost for developing the tool to supply 1000 nos. is Rs.50000. Your sale order rate should show Rs.100 and Rs.50 (Rs.50000 / 1000 nos.) separately.

2. How to identify whether we have reached the 
           amortization amount given by the client?

Explore the facility Lower limit and Upper limit in pricing condition

3. Is amortization value considered for excise duty base value?

Yes as per Central Excise Rule, you are suppose to pay duty on amortisation of tooling cost also. This means, you should have two condition types in your pricing procedure; one for selling price say PR00 and another one for assessable value say ZR00.

thanks

G. Lakshmipathi

[Former Member · Accepted solution]

Dear Lakshmipathi,

In case if the customer paid 100% of the amount in advance, the same method we need to follow or any different method is there to settle this amount.

Please clarify.

Regards,

Mullairaja

[Lakshmipathi · Accepted solution]

In that case, you can generate tool cost invoice separately. This is purely sellers discretion.

thanks

G. Lakshmipathi

[Former Member]

Answered

[Former Member]

HI

You have to define the DYE AMMORTIZATION COST as a condition type in your pricing procedure.

Create a condition type as ZAMD and make it statistical in your pricing procedure

You have to calculate the BED, EDU cess & Sec Educ cess on Basic price plus dye ammortization price.

If you want to track the die ammortization ie no of pieces produced. Then you have to go for condition update in your condition type for ammortization cost.

For example.

Your customer gives a dye which costs 1000 rs and the life of dye is 1000 pieces so

you have to add rs 1 to the basic price of the material.

regards