The charge per unit is outside tolerance and has not been approved.
The system adjusts the charge per unit to match the purchase order or approved levels, generating any necessary debit or credit notes.
Purchase Order (PO):
Charge Per Unit: $6.00
Quantity: 800 units
Total Charge Amount: $4,800.00
Invoice Received:
Charge Per Unit: $7.00 (outside tolerance of 16.67%, rejected)
Quantity: 800 units
Total Charge Amount: $5,600.00
Tolerance Levels:
Charge Per Unit Tolerance: ±5%
Since the charge per unit ($7.00) exceeds the acceptable tolerance range of 5% and has not been approved, the system will:
Reject the Invoiced Charge Per Unit: The system does not accept the invoiced charge per unit of $7.00 due to the variance exceeding the tolerance limit.
Adjust the Charge Per Unit: The system adjusts the charge per unit to match the purchase order or the approved charge per unit:
Adjusted Charge Per Unit = $6.00 (from PO)
Recalculate the Total Charge Amount: The system recalculates the total charge amount based on the adjusted charge per unit:
Corrected Total Charge Amount = Quantity × Adjusted Charge Per Unit
Corrected Total Charge Amount = 800 units × $6.00 = $4,800.00
Generate a Debit Note: Since the original invoice total was higher than the corrected total, the system generates a debit note for the overcharged amount:
Debit Note Amount = Original Invoice Total - Corrected Total Charge Amount
Debit Note Amount = $5,600.00 - $4,800.00 = $800.00
Process the Invoice: The system processes the invoice with the corrected total charge amount of $4,800.00 and issues a debit note for $800.00 to account for the overcharged amount.
This approach ensures that financial transactions are consistent with the purchase order terms, rejecting unapproved variances and maintaining accurate billing practices.