diff --git a/erpnext/controllers/stock_controller.py b/erpnext/controllers/stock_controller.py
index 2369c39f508..8c2b4db3fc9 100644
--- a/erpnext/controllers/stock_controller.py
+++ b/erpnext/controllers/stock_controller.py
@@ -1854,6 +1854,7 @@ def make_bundle_for_material_transfer(**kwargs):
 
 		row.warehouse = kwargs.warehouse
 
+	bundle_doc.set_incoming_rate()
 	bundle_doc.calculate_qty_and_amount()
 	bundle_doc.flags.ignore_permissions = True
 	bundle_doc.flags.ignore_validate = True
diff --git a/erpnext/stock/doctype/stock_entry/test_stock_entry.py b/erpnext/stock/doctype/stock_entry/test_stock_entry.py
index 68e57a3d971..cde5be4d6ee 100644
--- a/erpnext/stock/doctype/stock_entry/test_stock_entry.py
+++ b/erpnext/stock/doctype/stock_entry/test_stock_entry.py
@@ -2020,6 +2020,70 @@ class TestStockEntry(FrappeTestCase):
 
 		self.assertEqual(se.items[0].basic_rate, 300)
 
+	def test_batch_item_additional_cost_for_material_transfer_entry(self):
+		item_code = "_Test Batch Item Additional Cost MTE"
+		make_item(
+			item_code,
+			{
+				"is_stock_item": 1,
+				"has_batch_no": 1,
+				"create_new_batch": 1,
+				"batch_naming_series": "BT-MTE.#####",
+			},
+		)
+
+		se = make_stock_entry(
+			item_code=item_code,
+			target="_Test Warehouse - _TC",
+			qty=2,
+			basic_rate=100,
+			use_serial_batch_fields=1,
+		)
+
+		batch_no = get_batch_from_bundle(se.items[0].serial_and_batch_bundle)
+
+		se = make_stock_entry(
+			item_code=item_code,
+			source="_Test Warehouse - _TC",
+			target="_Test Warehouse 1 - _TC",
+			batch_no=batch_no,
+			use_serial_batch_fields=1,
+			qty=2,
+			purpose="Material Transfer",
+			do_not_save=True,
+		)
+
+		se.append(
+			"additional_costs",
+			{
+				"cost_center": "Main - _TC",
+				"amount": 50,
+				"expense_account": "Stock Adjustment - _TC",
+				"description": "Test Additional Cost",
+			},
+		)
+		se.save()
+		self.assertEqual(se.additional_costs[0].amount, 50)
+		self.assertEqual(se.items[0].basic_rate, 100)
+		self.assertEqual(se.items[0].valuation_rate, 125)
+
+		se.submit()
+		self.assertEqual(se.items[0].basic_rate, 100)
+		self.assertEqual(se.items[0].valuation_rate, 125)
+
+		incoming_rate = frappe.db.get_value(
+			"Stock Ledger Entry",
+			{
+				"item_code": item_code,
+				"warehouse": "_Test Warehouse 1 - _TC",
+				"voucher_type": "Stock Entry",
+				"voucher_no": se.name,
+			},
+			"incoming_rate",
+		)
+
+		self.assertEqual(incoming_rate, 125.0)
+
 
 def make_serialized_item(**args):
 	args = frappe._dict(args)
diff --git a/erpnext/stock/serial_batch_bundle.py b/erpnext/stock/serial_batch_bundle.py
index 203340a9ff5..21180accf83 100644
--- a/erpnext/stock/serial_batch_bundle.py
+++ b/erpnext/stock/serial_batch_bundle.py
@@ -185,7 +185,21 @@ class SerialBatchBundle:
 			}
 
 			if self.sle.actual_qty < 0 and self.is_material_transfer():
-				values_to_update["valuation_rate"] = flt(sn_doc.avg_rate)
+				basic_rate = flt(sn_doc.avg_rate)
+				ste_detail = frappe.db.get_value(
+					"Stock Entry Detail",
+					self.sle.voucher_detail_no,
+					["additional_cost", "transfer_qty"],
+					as_dict=True,
+				)
+
+				additional_cost = 0.0
+
+				if ste_detail:
+					additional_cost = flt(ste_detail.additional_cost) / flt(ste_detail.transfer_qty)
+
+				values_to_update["basic_rate"] = basic_rate
+				values_to_update["valuation_rate"] = basic_rate + additional_cost
 
 			if not frappe.db.get_single_value(
 				"Stock Settings", "do_not_update_serial_batch_on_creation_of_auto_bundle"