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Free goods play a large role in price negotiations with your customers.

As a result, free goods are determined to be


placed in sales document automatically. In retail, chemical industry or consumer goods industry, it is common to
provide discounts in the form of free goods.

a. Inclusive Bonus Quantities Free goods can be part of order quantity not included in the invoice (billing). This is
called inclusive bonus quantity. The ordered goods and the free goods both involve the same material. The quantity
units of the free goods and the ordered goods must be the same.

b. Exclusive Bonus Quantities Free goods that take the form of extra goods that are free of charge are called
exclusive bonus quantities. In this case, the extra bonus quantities are not typically included in the invoice (billing).
This can either be an additional quantity of the goods ordered or it can be another article. The exclusive free of goods
appear in the SD document as an individual free of charge item.

Both types of free goods are treated in the same way in the sales order. The material that has been ordered is
entered as a main item (TAN) and the free item (TANN) is automatically displayed as a sub item. The item category
determines how the item is controlled later in the business process.

The system re-reads the free goods master record in the sales order if the quantities in the main item change or if the
pricing date changes. The system then deletes the sub items and re-creates them. Any manual changes to the free
goods quantity are lost.

<b>Note:</b> If pricing is re-run in the sales order, it does not affect the free goods determination.

The condition technique is used for free goods. Free goods are generally regarded as a supplement to the pricing
agreement for a material. You can define master records for free goods at any level such as material,
customer/material, price list category/currency/material or customer hierarchy/material. The transaction code is VBN1
and condition type NA00 which automatically gets converted into R100 during sales document processing.

You can restrict a free goods condition master record for one level in many ways

a.

Validity period: the condition is only valid within this period

b.

Lowest quantity: the condition comes into affect when this quantity has been exceeded.

c.

Delivery control:

d.

Calculation type:

e.

Scales

You can process different master data with the same key for inclusive and exclusive bonus quantities at the same
time. You only need to press a button to switch between two types of discount. When you enter an exclusive bonus
quantity, an extra entry line appears where you can enter the free material if it is not the same as the ordered
material.

When you specify a calculation rule, you decide how the system determines the free goods quantity in the sales order
from the additional and document quantities.

a.

The free goods quantity is the quantity that is calculated from the discount quantity (not the minimum quantity)

b.

Additional quantity is the quantity delivered free of charge

c.

Document quantity is the quantity entered by the person creating the sales order.

three calculation rules are provided by the system i.e.

<b>a. Prorated </b> the system calculates the free goods in right proportion to document the quantity. For
example if 20 units are offered for free for 100 units in the condition record and the customer orders 162 units, then
the system calculates 162 * 20/100 (rounded off) as free goods.

<b>b. Related to units </b> 20 units are given for free for every 100 units ordered. In the above case the
customer would only get 20 units free as he placed an order for 162 units.

<b>c. Whole units </b> the customer would not get any free goods if he doesnt match the exact quantity
proposed. That is, in the above case, the customer doesnt get any free goods as the ordered quantity did not match
100 units. Anything below or over the mark will not be qualified for a free good.

Calculation rules are stored in the system in the form of ABAP/4 code. You can also define your own rules by using
transaction code VOFM (system modifications).

The free goods determination procedure contains a list of condition types for the free goods. One access sequence is
assigned to each condition type and each access sequence contains one ore more accesses and each access
contains exactly one table. This represents the search key that the system uses to search for valid condition records.

The free goods determination procedure is assigned to sales area + document pricing procedure + customer
pricing procedure just as in the case of pricing procedure assignment as free goods are generally regarded as a
supplement to the pricing agreement for a material.

If the search is successful, the system generates a sub item for free goods in the document. The item category is
assigned with the item category usage FREE.

You can activate an analysis of the free goods determination in the sales document. The system then displays
detailed information on how the free goods were determined.