Dynamics 365 Business Central: Item Costing Part 15

Dynamics 365 Business Central: Item Costing Part 15 - Changing Standard Cost

Hey, everyone. First things first, I want to talk about iNECTA University. We have decided to have that online, the next session that's coming up. It's manufacturing. That means it's not in-classroom training. You're actually going to be logging onto a website of ours where the training is going to be held by an instructor. It's an intense training; it's three days. It doesn't matter where you are in the world, and I know a lot of you that are watching the Coffee Mug Videos come from all over. If you want to partake in this, go to the link below and check it out.

Other than that, we get into standard costing. Just keep going on costing, right? I promised you I would, and here it is. Basically we have a standard coffee mug, and the cost was set at $5. Now, what happens if you change that cost? All of the entries that are coming in, the purchases that are coming in, are at $5. If I go ahead and I go to the cart and I change it and say it's at $4, what happens to the existing entries there? Do they change to $4? They don't. They stay at whatever cost the cart was when the product was received. Then when you actually change the cost to $4, new entries that get posted in get posted at the new cost. There is various different ways to actually change the cost. There's something called a standard cost worksheet. I'm not going to get into that in the screen share, but that basically allows you to change the cost with the bill of material to actually roll that up.

Also, what happens? Let's say if you have a sales order with the standard coffee mug on there for whatever, one piece and the price or the cost. The unit cost is $5. That was created when the cost was $5. Now, if I go into the cart and change the cost to $4, does the sales order, created here, change? This order has not been posted. The answer to that is no, it stays. The sales area is a snapshot of the unit cost at the time when that sales order line was created, so captured from the cart. This is actually a big thing because the sales order might be very old. The sales line is very old, and let's say the cost might've been changed multiple times and the salesperson doesn't realize that. Maybe the profit is way off from what it should be. Anyways, those are important facts. This comment on less costing piece is the same problem for our customers' methods, not only standard cost. Let's take a look at the system.

Let's take a look at items and get into the standard coffee mug. Just want to emphasize the thing that I just went over on the blackboard. If I go over into the standard coffee mug, the costing, obviously set up a standard, can be changed. I can change it from 4 here to 5, and it basically gives me this warning talking about the open entries If I just say yes, now the cost is changed. Now, I did post an entry at a different cost, and I'm just going to take a look at that here. Now I have two purchase entries. I posted first the one for 5 and 10 items, so I get $50 in. Then I changed the cost to $4 and posted 10, and I get that from $40. Now I have two costs on that item because I manually changed the cost. Basically, you are steering the cost. You can go in there, you change the cost of the item, and the cost affects all new purchases.

How does it work when I'm selling? Let's take a look at that as well. If I go in here and go into a sales order and take a look at that, I'm just going to put the standard coffee mug onto a sales order and pick up here; I date them and the number is standard coffee mug, out of the main location. You can see here that the cost is coming at 5 because I just changed it back to 5. If I say I want to sell 15, which is going to be 10 at 5 and 10 at 4 – but technically the unit cost here is sort of incorrect. It was an estimate of the unit cost at the time or the standard cost that was entered at the time.

Let's say if I go out here and into that item cart again. I go ahead and change this to 10, it gives me this. This is talking about those sales orders that are sitting out there, basically. If I say yes, I want to change it, I go back into my sales order – nope, I accidentally hit a key here. Okay, so if we go out and we go back into sales orders and take a look at that last sales order here – it might've been this one or the other one; not that one. Those are the chairs, right? Here we have 15. You see that the cost is still 5 on this order. I changed it to 15 and this order hasn't been shipped or anything and it's still keeping the old cost. This has always been like this with any of the – the cost on the sales order does not update automatically. There's a warning there when you change it on the cart. That's what that applies to, basically.

With standard cost – and this actually applied to everything. When you have FIFO, it grabs the FIFO cost at the time of creation of the order and then if FIFO cost changes, it's not updated on the order. Now, it's more dramatic here because you can basically go in here and change the cost yourself and the orders are not changed. That's pretty much how standard cost works as far as changing the cost on standard cost.