Item Unit Price vs. Unit Cost/Profit Calculation

apickard

Hi,
the idea of this thread is more as a discussion re best practice for the below issue rather than a definite solution.

Issue:
Client needs to have a Unit Price for each item fixed before selling to Customer. The Unit Price is calculated based on Cost + Profit. When he recieves the products he wants to start selling the product immediately even if not all respective invoices are received as yet (usually he immediately receives the Direct Cost related Invoice, and has an estimate for the other related costs such as shipment and delivery however these related Invoices are usually received later). Besides, the client needs to issue a 'Sales profit' report every month whereby reported values never changes once reported and analysed!

Mapping such requirements in Navision, what is/are the best setup practice to meet such requirement, keeping in mind that additional costs will be treated as Item Charges and entered at a later date than when item is actually sold?

My view:
I forsee an issue with the above since Navision Inventory Costing philosophy is quite different than the above requirement, keeping in mind that Item Charges do change both the Item Cost and Unit Price (if these are related). Moreover the Adjust Cost Batch job might (or will) change the Unit Cost (and profit) if the UC is changed due to Item Charges or related adjustments

Any ideas??????? #-o

ara3n

Tell the client about the issues and ask them how they want to proceed.

If the business rule is that they do not want to allow for features, and you need disable item charge.

Prevent invoicing of Sales before invoicing of purchasing.

The report will only print sales that have been invoiced.


I would predict that the customer will come to the conclusion that requirements is unrealistic and will prevent them from running business.

idiot

The real issues are actually these.

apickard wrote:

Besides, the client needs to issue a 'Sales profit' report every month whereby reported values never changes once reported and analysed!

apickard wrote:

...additional costs will be treated as Item Charges and entered at a later date than when item is actually sold?

The rest are typical sales, possibly with drop shipment, special order....
The additional costs would probably go to a G/L account rather than charged to the Item...

apickard

Hi,
First of all thanks for your comments however the client wo't be happy with the restrictions (as per Rashed's comments). The issue is that the Sales Manager needs to know what is the actual cost (in total) before setting up a sales price and actually selling to the end customer (market in this sector has a very low profit margin). However he does not want to loose sales because the company is slow to react to such price changes!

Therefore if for example he knows the Master Cost, Shipping cost but still need to receive the delivery cost (which is also treated as part of the Direct Cost) is there any way he can calculate the Actual Unit Cost and in conjunction the Unit Selling Price using an APPROXIMATE delivery cost ?

In such instances the Sales Manager will know the APPROXIMATE delivery cost however I don't know of any solution (with no/ minimum customisation). whereby a user can work with Expected Costs in Navision until actual cost is known. If a customisation is the solution, I'm seeing this as a very complex issue since Direct Costs are increased only if Delivery Invoice is linked to original Receipt using Item Charges!! Can such customisation ever work correctly??

Can you suggest alternative methods? How are other companies working around such issue?

apickard

Any other ideas as yet?

One of the biggest concerns here is the Profit Issue... ie; if a Profit Report is issued at the end of month showing profit per Product Group and an Invoice related to a prev delivery is received after such report is issued, the user has two options - either allocate through item charges or leave it unallocated.

The first option in my opinion is the correct one since direct cost is showing the true value, however any reprints of the above mentioned report will show different figures. Management don't like to see such different figures.

The second option will not change costs/profits however the Item Direct Cost is not showing the true correct value.

Any ideas/ experience how such issue is best resolved ?

ara3n

what costing method does the client use?

apickard

Average.

ara3n

with average, the unit cost will be even be changed by another PO that gets received, adjustment you make, and transfers.

Tell them that it's a catch 22 situation and you can calculate fixed price based on cost that will change in the future.

The monthly report can be written if they are close the accounting and inventory periods so nothing gets posted and you can write your report based on asOfDate.

As far sales Price calculation goes, I suggest that they add some formular that will calculate a markup that can be added based on average cost.

apickard

Hi Rashed,
thanks a lot for your reply.

Yeah, I thought there's no such simple rule in such a situation :-k However I liked the idea about 'cut off date', not letting user run report before closing Inv period. As to 'Sales' Unit Price, we have to do some sort of modification on the PO/PI to allow user/system to calculate the new Unit Price based on both Actual info (where available) and estimates (where not available).

Once again thanks to all for your sharing of ideas.