Dynamics 365 Business Central: Item Costing, part 7

Dynamics 365 Business Central: Item Costing, part 7

Alright, so we're going to do costing again!

In this one we're actually going to talk about a very interesting topic that's going to throw people off a lot, or has thrown people off a lot in the past.

It has to do with a sales order. Actually, there was a comment that came on a question of whether changing the sales price would change the interim cost of goods sold posting.

It doesn't because the price doesn't affect the cost and you can put the price whatever you want. The cost is still the same. So the interim posting on the cost of goods sold is going to be the same.

But there is a little caveat in that.

If we (and I'm going to show you in the system) look at a sales order, and you have sales order lines here and here. You have the item number, I'm just going to do it like this, and description.

Then you have quantity and then you’ve got (I'm actually going to put it here) the unit price, and I'm going to show a column here in the video (you're going to see in a little bit), which is going to be unit cost.

You can actually view the unit cost on the sales line. This is a sales order. You can see the unit cost. You have the spring coffee mug, and let's say the price is $10.

The unit cost automatically populates with the current cost of the item in the system. It's like a snapshot of the of the current cost of that item. Let's say that's at $6. If you hit statistics (go into stats), you show more on the statistics screen, because it doesn't show right away, you can see that since the quantity is 5, the total sale is going to be $50.

This is revenue, and then the cost is going to be $30, and your profit is going to be $20. You can see that as statistics. Is this true? Am I really going to make $20 on this?

Not necessarily, because this cost here is a snapshot of the cost when the sales order was created. This cost does not dynamically change as you are buying more of the product and selling of the product.

There might be a hundred things happening behind the sales order which are changing this cost. It's just a snapshot, and this number here, the cost, will not change. That's why Microsoft, after partners like us, yelled and screamed that this was very misleading, to only have one cost doesn't change.

Microsoft added something, this was maybe five years ago, ten years ago maybe. Tom knows this (Tom Blaisdell), when that was, cost adjusted, and you're going to see that. So when you actually post it’s going to fix the cost for the actual cost that the item has when you post it.

That exact time when it grabs it out of inventory and ships it out. That might be at $7, it went up. So the cost adjusted is going to be 35, price is still 50, and you're only making $15.

If you’re a sales person and you put something on a sales order, it’s not necessarily perfectly guaranteed that you're going to get this profit. But once you’ve it's posted and it's out the door you know exactly what profit that is.

The interesting part is, if I edit this field (this field is editable), if I change it to like 1000, this number over here shows 5 x 1000, so you're losing a lot of money.

However, the system just changed it again when you posted to the correct price, which would be 7, overrides it.

Even if you do a ship, not invoice and you try to get this $1000 into the cost of good interim account, the system actually fixes that as well, right away. So you see 1000 posted in cost of goods sold interim, and then fixed right away. So you can't cheat the system. Microsoft has made it rock-solid now.

If you get into the item card for this, there's a unit cost field there and it's not editable, of course, and that is for maybe, let's say $6.

But, you can actually drill into it. I'm going to make this arrow. This used to be like way we used to do that, but now you just click on the six.

Now when you drill into that you get all of the cost entries that show you that this is the $6.

So these cost entries will explain to you why it's $6, and that has to do with whether it's a FIFO, LIFO, standard, or specific costing method.

That's why we're going to keep going on costing because we might want to jump into these next.

So if you don't like costing you're in for plenty more, enjoy!

Let's take a look at the system again

I'm here in sales orders and I open up a sales order. I've created a sales order for the spring coffee mug and I made visible the unit cost field for the line. It automatically populated with $5.27, approximately.

This unit cost is actually editable, which is really strange because the system will post the exact cost, or the accurate cost, no matter what you put in here.

You could put whatever you like in here and the system will basically override that with the actual cost that you paid for the item.

But anyways, let's ignore that for a second. If I go into order here, and statistics, and I hit show more here, I can see that we see the profit and that profit is calculated from the line as you can see.

So if I do change this, let's say I put this into $9 and I go here into order statistics, it'll tell me that I'm only making $10 on this. But it's not true because the true cost of this item is closer to whatever it was, $5.30.

If I'm changing this, it's not changing reality, I'm just changing the statistics screen. That's why when we actually post the order, and it updates the costs and fixes it, it will do this original cost, adjusted cost. Adjusted cost is the one that gets fixed.

We're going to play a little bit with that, once we get into the costing with it, so I'm going to move forward on that.