Using Negative Values in Material Overhead

Hi -

We have a client that purchases an item that has three different grades: sub-standard, standard and premium.  We have three separate item numbers for these different grades.  All three grades of the item are all purchased at the same purchase price, but have a different unit cost.  To achieve the different unit costs, we are applying material overhead rates.

For example, the purchase price for all grades is $100 per lb.  For the standard grade, the unit cost equals the purchase price of $100 per lb.  For premium grade, the unit cost equals the purchase price + 10% material overhead for a total of $110 per lb.  For substandard grade, the unit cost equals the purchase price - 10% material overhead for a total of $90 per lb.