>We have a client that wants our Purchase Order form to accumulate and allocate freight and other aquisition related expenses to the cost of materials in inventory. Is that proper? So far we have maintained that those are overhead expenses and although you may want to consider them when setting sales prices, they should not be rolled into the cost of goods sold.

When the PO is "received", there may be related freight and / or brokerage fees.

These costs are associated with the items received FOR THIS PO.

Typically, there is just a TOTAL freight and / or brokerage so one "allocates" the total to the individual items based on weight and / or initial purchase cost, for that receipt.

The sum of the purchase cost + the allocated freight / brokerage for each item then makes up the total "purchase cost" for that item which is then added into inventory, for that item. This then results in an average cost for that item (assuming a running average method, vs LIFO or FIFO).

So, it's NOT overhead ... these costs are part of the purchase price and ultimately part of cost of goods sold (and work in progress material, if tracked).