Residual Price Allocation
Certain sold items do not have standalone selling prices. For example, when an item is never sold separately. In this case, you can configure the system to mark the performance obligation as Residual
when generating a performance obligation for the item.
Performance obligations are organized in a tree structure. For performance obligations under the same branch or under the root, one of the performance obligations can be missing the standalone selling price and be marked as residual.
When the system allocates the transaction price, it aggregates the amounts of all pricing condition types and allocates the total amount down the hierarchy of performance obligations. When the residual method is used for allocation, the following rules apply:
Of all performance obligations with the same higher-level performance obligation in the hierarchy, only one performance obligation can be marked as residual.
The performance obligation marked as residual does not have a standalone selling price.
All performance obligations other than the one marked as residual must have standalone selling prices.
Performance obligations with standalone selling prices use their standalone selling prices as the allocated amounts. After these performance obligations have claimed their portions, the remainder is assigned to the performance obligation that is marked as residual.
If the sum of the standalone selling prices exceeds the amount that is to be allocated, a zero amount is assigned to the performance obligation marked as residual. The total amount is allocated to the other performance obligations in proportion to their standalone selling prices.
Example
Example 1:
Assume that your company sells a bundle for EUR 50. The bundle is composed as follows:
Two pieces of product A that sell for EUR 10 each
One piece of product B that sells for EUR 20
One piece of product C that does not have a standalone selling price
You have configured the system to create a performance obligation for each product in the bundle, and to mark the performance obligation for product C as residual. In this case, the residual method results in the following allocation:
Performance obligation | Sales Order Item | Standalone Selling Price | Quantity | Allocated Amount |
|---|---|---|---|---|
POB1 | Product A | EUR 10 | 2 PCS | EUR 20 = 10*2 |
POB2 | Product B | EUR 20 | 1 PCS | EUR 20 = 20*1 |
POB3 | Product C | None | 1 PCS | EUR 10 = 50-20-20 |
Example 2:
Assume that your company sells a bundle for EUR 30. The bundle is composed as follows:
Two pieces of product A that sell for EUR 10 each
One piece of product B that sells for EUR 20
One piece of product C that does not have a standalone selling price
You have configured the system to create a performance obligation for each product in the bundle, and to mark the performance obligation for product C as residual. In this case, the residual method results in the following allocation:
Performance obligation | Sales Order Item | Standalone Selling Price | Quantity | Allocated Amount |
|---|---|---|---|---|
POB1 | Product A | EUR 10 | 2 PCS | EUR 15 = 30*[(10*2)/(10*2+20*1)] |
POB2 | Product B | EUR 20 | 1 PCS | EUR 15 = 30*[(20*1)/(10*2+20*1)] |
POB3 | Product C | None | 1 PCS | EUR 0 |