What does the raw material price linkage calculator show?
This calculator compares the supply unit price and total payment when raw material prices change under a Korean price linkage agreement.
It is intended for manufacturing business owners, cost accountants and purchasing teams reviewing the same agreed indicators and material usage.
Each selected material is tested against its own price-change threshold before increases and decreases are combined.
The page uses Korea-specific 2026 rules and amounts in KRW.
A higher material market price alone does not determine a supply-price increase.
The agreement’s indicator, reference periods, usage and pass-through determine the supported calculation.
Default copper and steel values are illustrative examples, not live prices or a company’s actual costs.
Replace them with your own records and use the saved worksheet to reconcile the adjustment with the counterparty.
Amounts and verification status belong together
A numerical scenario can be available while the agreement basis or delivery effective date is still unconfirmed.
In that case the difference for this delivery remains pending.
The material ledger shows actual cost share, price change, agreed threshold, unit contribution and inclusion status so assumptions stay visible alongside the amounts.
Separate the 10% cost share from the price-change threshold
Major material cost share
Article 2(12) of the SME Cooperation Act and Article 2(16) of the Subcontracting Act define a major raw material by its cost being at least 10% of the relevant supply or subcontract payment.
An actual material cost of KRW 1,000 against a matching KRW 10,000 unit payment is exactly 10% and meets the numerical threshold.
KRW 999.99 is below it.
Two distinct materials costing KRW 600 each cannot be combined into one KRW 1,200 major material.
Agreed price-change threshold
The parties agree the price-change threshold within 10%.
An agreement using ±3% includes exactly +3% and −3%; +2.99% and −2.99% remain below it.
An agreed 0% or full-linkage threshold allows changes to be reviewed at every adjustment date.
Do not enter the 10% cost-share criterion as the price-change threshold for every agreement.
Use actual cost records to review major-material status.
An agreed indicator price may differ from the purchase price, so multiplying that indicator by usage may also differ from actual cost.
The calculator therefore asks for actual unit material cost separately from indicator prices.
The cost-share denominator must use the same contract, quantity and VAT basis.
Confirm legal coverage and calculation scope
Review transaction and party requirements under the SME Cooperation Act or the Subcontracting Act before choosing the basis.
A selection on this screen does not establish legal coverage.
Also review the original contract date, amendments, applicable transitional provisions and any material-specific voluntary agreement.
Agreement-entry exception checklist
- Check whether the commissioning enterprise or principal contractor is a small enterprise under the Korean Framework Act on SMEs.
- Review the ordinary exceptions for a transaction period of 90 days or less and payment of KRW 100,000,000 or less.
- Check the decrees’ separate-notice provisos and any transaction-specific standards.
- For a non-linkage agreement, review whether its intention and reasons are clearly recorded in writing.
The parties may make a voluntary linkage agreement even when an exception applies.
A material below 10% may be selected after checking an actual voluntary agreement for it.
Improperly splitting periods or payment amounts, or presenting the same material as different materials to evade coverage, requires separate legal review.
Energy and other formulas
The current laws checked on 2026-10-09 also cover major energy expenses or major energy costs.
This calculator supports raw material price difference × usage × agreed pass-through.
Energy tariffs, index formulas, formulas applying a percentage to the entire finished-product price and asymmetric upward/downward thresholds require separate calculations.
Prepare inputs on matching units and periods
Supply price and actual costs
The current supply unit price is the price actually used immediately before this adjustment.
The payment denominator is the matching unit payment used to review major-material cost shares.
If a previous adjustment changed the price, check which reference time the agreement and cost records use.
When material costs exceed the denominator, review duplicates and quantity basis; keep evidence if the supply actually makes a loss.
Indicator and two reference periods
Record the indicator name and source specified in the agreement, with its base and comparison averaging periods.
A daily quote can produce a different result from an agreed monthly average.
Base and comparison prices must both be KRW per the same material unit.
Convert units before calculation if prices use KRW/kg and usage uses tonnes.
Usage and pass-through
Usage is the amount of material per one supplied product.
For 0.125 kg per product, enter 0.125 rather than the total material quantity for all deliveries.
Pass-through is the agreed proportion of the material price difference included in the formula.
Keep it distinct from actual cost share so the same proportion is not multiplied twice.
Dates, quantity and rounding
The adjustment date is when the agreement calls for the indicator comparison.
The effective date determines which deliveries use the adjusted payment.
Confirm the actual delivery date and quantity separately.
Calculate one product, one effective date and deliveries on the same date together; separate other delivery groups.
Choose the agreement’s adjusted-unit-price rounding method.
Use VAT-exclusive KRW for every price and cost.
Convert foreign-currency prices first using the agreed exchange rate and conversion method.
Do not apply the same exchange rate again to a price that already includes it.
Index points of 103 are not a material price of KRW 103; convert them through the agreed formula before entry.
Supply unit price and payment formulas
Cost share = actual material unit cost ÷ matching unit payment denominator × 100
Price change = (comparison price − base price) ÷ base price × 100
Material unit adjustment = (comparison price − base price) × usage per product × agreed pass-through ÷ 100
Adjusted unit price = current supply unit price + sum of selected material adjustments meeting their thresholds
Scenario total difference = displayed adjusted unit price × quantity total − displayed current unit price × quantity total
For each material, compare the absolute price change with the agreed symmetric threshold.
When the threshold is met, use the full material price difference in this supported formula, rather than only the excess above the threshold.
Unselected materials and materials below their thresholds contribute zero.
Do not multiply the cost share used for major-material review into the unit adjustment again.
Combine increases and decreases first, then round the adjusted unit price once according to the selected agreement method.
A zero combined change preserves the existing price.
Total payments are displayed rounded to whole KRW for comparison; reconcile invoice and settlement rounding separately.
This is the agreement formula supported by this tool, rather than a single statutory formula for all contracts.
Steps to calculate and reconcile the adjustment
- Review the contract and basis. Find the applicable law or voluntary agreement, product and selected materials.
If the agreement or formula is unconfirmed, retain the output as a discussion scenario.
- Enter costs and indicators separately. Review shares using actual material costs for the same product, then enter agreed indicator prices and periods.
Check how a previous adjustment updates the base time.
- Enter usage, thresholds and pass-through. Each material can have its own threshold and factor.
Add up to 8 material rows and check agreement scope.
- Confirm delivery date and quantity. Check that the quantity belongs to deliveries on or after this effective date.
Separate earlier deliveries and groups with different effective dates.
- Save the review worksheet. Confirm actual costs, schedule and each selected material’s agreement terms, then save TXT or print.
Present indicator source, periods, usage, pass-through and rounding to the counterparty.
Editing inputs clears the related confirmations so an earlier confirmation does not silently apply to a different indicator or quantity.
Correct blank numeric fields, malformed commas, zero base prices, negative prices and invalid dates before reviewing results.
Unknown dates may stay blank but keep this delivery’s amount pending.
Illustrative copper and steel supply example
Assume a current unit price of KRW 10,000, quantity 1,000, usage of 1 kg per product for each material, a ±3% threshold and 100% pass-through.
Copper moves from KRW 3,000/kg to KRW 3,300/kg, while steel starts at KRW 2,000/kg.
If verified actual unit costs are also KRW 3,000 for copper and KRW 2,000 for steel, their shares are 30% and 20% respectively.
Agreed payment scenarios with rising copper prices and falling steel prices| Scenario | Copper KRW | Steel KRW | Unit price KRW | Total difference KRW |
|---|
| Steel 1,960: −2% below threshold | +300 | 0 | 10,300 | +300,000 |
| Steel 1,800: −10% included | +300 | −200 | 10,100 | +100,000 |
| Copper 50% pass-through; steel 1,800 | +150 | −200 | 9,950 | −50,000 |
The first scenario has an adjusted total of KRW 10,300,000 against KRW 10,000,000 previously.
The second combines both directions for KRW 10,100,000.
The third totals KRW 9,950,000, a payment decrease of KRW 50,000.
Review agreed decreases and pass-through alongside price increases.
Interpret effective dates, rounding and result states
Earlier delivery and delivery on the effective date
Assume an adjustment date of 2026-10-01 and an effective date of 2026-10-05.
A delivery on 2026-10-04 has a zero adjustment for this delivery.
From 2026-10-05 itself, review the adjusted amount using the confirmed agreement and quantity.
The default 1,000-item delivery on 2026-10-10 is after that date.
Unknown dates keep the delivery amount pending even when a scenario unit price can be calculated.
Fractional usage and rounding differences
A price move from KRW 100 to KRW 103 with usage of 0.125 gives a unit adjustment of KRW 0.375.
After adding it to KRW 10,000, rounding to two decimals gives KRW 10,000.38, while rounding down gives KRW 10,000.37.
Two materials contributing KRW 0.4 each combine to KRW 0.8, producing a whole-KRW rounded price of KRW 10,001.
Rounding each material first can lose that contribution.
Pending results and valid zero results
Pending agreement review means the basis, actual costs, schedule and quantity, or selected material terms are unconfirmed.
All changes below thresholds, unchanged prices, 0% pass-through, no selected materials and zero quantity can instead be valid zero results.
Negative adjusted prices or results above the supported unit-price limit of KRW 1 billion and total limit of KRW 10 trillion require input correction.
Those limits define software scope, not statutory contract limits.
Three practical manufacturing uses
Monthly reconciliation with purchasing
Record each material’s agreed monthly average indicator alongside its previous base price.
Showing that copper meets its threshold while steel does not gives a concrete explanation of the adjustment.
If the indicator publication date differs from the adjustment date, confirm the averaging period in the agreement.
Budget review before renewal
Compare 100% and 50% pass-through to see how the same price movement changes payment.
This is an arithmetic comparison for discussions, not a determination of an agreement’s legal validity.
Use counterparty-confirmed usage and factors and renew the confirmation checks after editing inputs.
Separate delivery groups for settlement
Calculate deliveries before and after the effective date separately.
Avoid applying one price to different products or effective dates.
The TXT preserves indicators, periods, prices, usage, thresholds, pass-through and confirmation status for reconciliation with price-change and delivery records.
Late-payment interest and bill discount fees on unpaid amounts belong to the separate subcontract payment calculator.
Frequently asked questions
Does exactly 10% meet the major-material criterion?
Yes, the numerical criterion includes an actual material cost of exactly 10% on the matching payment basis.
Review transaction scope and cost evidence too.
Major-material status stays pending until actual costs are confirmed.
Must prices rise by 10% before adjustment?
Use the parties’ agreed threshold within 0–10%.
An agreement of ±3% includes exactly 3% increases and decreases.
Do not substitute the 10% cost-share criterion for the price-change threshold.
Can falling prices reduce the payment?
The supported symmetric formula includes decreases that meet the threshold.
Combining one material’s increase and another’s decrease can produce a negative total difference.
An asymmetric agreement needs a separate calculation.
Should I multiply pass-through by actual cost share?
This formula multiplies price difference by usage and agreed pass-through once each.
Actual cost share is for major-material review and is not multiplied into the contribution again.
Check the contract separately if it uses a different formula.
Can a contract within KRW 100 million or 90 days be calculated?
Distinguish the legal agreement-entry exceptions from a voluntary linkage agreement.
An actual voluntary agreement can be used after review.
Also check small-enterprise status, separate notices, and the written intention and reasons for any non-linkage agreement.
Can I enter foreign-currency prices or index points directly?
Prices and usage must use the same KRW units.
Convert foreign prices using the agreed exchange rate and index points through the agreed price formula first.
Avoid applying an exchange rate again when the indicator already includes it.
Does the new price apply to earlier deliveries?
This screen returns zero for this delivery when its entered date precedes the effective date.
Any retrospective claim needs separate agreement and fact review.
An unknown effective date keeps the amount pending.
Can the result be treated as the final legal claim?
Use it to reconcile costs, indicators, usage, periods, factors, dates, quantity and rounding with the counterparty.
Legal coverage, agreement validity, final settlement, VAT and actual payment are not automatically determined.
Save pending items alongside the numbers and prepare additional evidence.
Official sources and the 2026 rule basis
The National Law Information OPEN API was queried directly for current articles on 2026-10-09.
SME Cooperation Act Articles 2 and 21: MST290193, Act22033, effective 2026-09-29.
Its Decree Article 14: MST287277, Presidential Decree36424, effective 2026-07-01.
Subcontracting Act Articles 2 and 3: MST288625, Act21857, effective 2026-10-02.
Its Decree Article 3: MST288455, Presidential Decree36562, effective 2026-08-11.
When laws or standard agreements change, review the major-material definition, energy scope, required terms, exceptions and anti-evasion provisions together.
Recheck indicators, exchange rates, usage, actual costs, effective dates and quantities using contract records at every adjustment.
Review the agreement’s base-time update rule after a previous material adjustment; reusing the original base can duplicate changes.
Prepare the material adjustment worksheet
Gather the agreement, cost breakdown, indicator records for both periods and delivery statement, then calculate using your own values.
Review each material’s threshold and pending checks together with the total difference.
Save the TXT worksheet or print it to confirm unit price, effective date and rounding on the same basis with the counterparty.
Calculate the material adjustment