What is a Conversion Factor?
Updated
by
Cheryl Wallace
A Conversion Factor is used in the Purchasing module for ordering. It determines the ratio of Issue Units of Measure within each Purchase Unit of Measure. This is generally 1 but if you are purchasing in box quantities or other measurements, such as for volume discounts, the Conversion Factor can be a greater number. When the inventory is received, the quantity on hand is automatically converted to the number of issue units and the cost is calculated accordingly.
Examples:
- You might purchase electrical tape in packages of 10 rolls but issue each roll individually. In this case, the Conversion Factor on the purchase requisition or purchase order would be 10 for each "10 pack" ordered. Ordering 2 "10 packs" would add 20 rolls of tape into inventory when received. (Quantity of Purchase UoM x Conversion Factor).
- Earplugs might be ordered in boxes of 200 pairs but issued by pair. In this case, the Conversion Factor on the purchase requisition or purchase order would be 200 for each "box of 200 pairs" ordered. Ordering 1 "box of 200 pairs" would add 200 pairs of earplugs into inventory when received. (Quantity of Purchase UoM x Conversion Factor).
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