Dynamics 365 Business Central: Landed Cost

Dynamics 365 Business Central: Landed Cost

hey guys we're going to talk about item charges, or something called landed cost, in the industry we talk more about landed costs, in NAV or in Business Central we talk about item charges. The reason is landed cost just talks about cost that you put on top of the product as it comes in like Freight, duties, etc. However, item charges are symmetrical in Business Central meaning that you can put it on any receipt, any shipment whether it's inbound on the sales side inbound outbound or inbound up on the purchase side, so purchase return orders, purchase receipt, sales return orders or sale shipments.

Why does it work? it's an extremely cool concept. The reason why it works is because in Business Central you have something called item and then, underneath Neath that we have something called item ledger entries and those are the transactions, so in this case let's say if we have a coffee mug as the item and then a transaction could be purchase for quantity 10 and let's say for $100 a month. So, the unit cost is $10, so that's a transaction and that happens maybe 1st of January 19 so, that we call item ledger entries because there are ledger entries for the editor.

Now, what Business Central has on top of that is it has something called value entries which is a sub ledger of the item ledger entries and that's what enables landed costs, so what that means is that this amount right here $100 is actually made up of a value entry that comes in here, which is called the direct cost for $100, which is direct cost to the vendor whatever under that is. When we want to book a purchase order to a freighter, so let's say there's a PO to a freight company, let's say it's FedEx, for $50 and we want to apply this $50 to this purchase receipt, we can do that, when we actually do that and we post this purchase order, there's another value entry that happens to come in here called item charge for $50 which means that this item ledger entry here changes to a $150 which means that the unit cost here becomes $15. This could have happened the direct cost of course 1/19 and the PO here, could have happened on the 1/15.

So fifteen days later and that would have been here, 1/15/19, the cost of the item could have changed fifteen days later, which means It got raised so that's called landed cost and that means, even if the item was sold; so I'd say it was sold on the fifth here a sale ,let's say all of it was sold ten, for let's say the price was two hundred, the cost was one hundred because that's what the cost was when the sale happened, but then when the item charts comes in fifteen days later or let's say ten days later than the sale; the cost gets updated to 150 and the system posts an extra cost a good sold after the fact, which is brilliant, and you can only do that if you have these three levels. We're going to show you that in the system, let's take a look.

In this system what we're going to do is record an item charge or landed cost. We go into items and if I go into the coffee mug, I have here the item card and I am going to navigate into the item. Sorry, history entries, ledger entries. That is basically everything that's happened with this item and we have a few purchases as you can see, so this one actually we only have one well anyways, we have a purchase here for $20 and its $50, notice that I can click on $50 and that will give me the cost, I've opened that up, this is the direct cost to the vendor for $50. This is what we paid the vendor and the cost per unit is 2.5.

Now we're going to pay Freight on this and what I want to do is, increase the cost of this item right here, even though it's this item has gone through probably a lot. It's been negatively adjusted, it's been sold, there's a lot of transactions right here, in any case I want to increase the cost, so how do I do that?

I actually go in to purchase invoices, actually I'm going to do a purchase order, don't think it matters which one you do, but what we need to do is create a liability. I click on new, pick a vendor and I'm actually going to pick the Fabrikam, that's fine they actually shipped it to me as well and sold it to me. Over here, in the typeI can pick charge, or item Charge and click on number, and here you set this up if you're setting up a system. But in the demo system it gives us a few options here, and I'm going to go ahead and say this is purchase Freight, there's no location needed, you know that measure technically is not needed but I am just going to put it as pieces, quantity is one, because we're just paying one amount and we paid 300 dollars.

Now I've got a charge to the vendor that I want to put on top of the cost of the item that I received, now you go into more options, line and click on something called item charts assignment, over here I can hit actions functions, get the receipt lines; it's funny that it goes hearing sales get receipt lines and then in action functions I have the other options; technically what this means is though we can actually put this on any type of receipt or shipment, but I'm going to go ahead and get receipt lines and I will get all the receipt lines that are here in the system, there's a lot.

I want to go ahead and search for the coffee mug and I'll have that here, now, that brings that into this screen here, I could have brought in a lot of receipts a lot of different items and it asks me, okay so how do you want to assign this? I'm going to go ahead and hit functions again, over here, suggest item charts assignment and it basically puts three hundred to one; I didn't even ask me, I think the reason why is because I had quantity one; so there was really no way to distribute this any differently than to this line, I think, if I had more lines it would have brought up a list or a few options that I could have set up to distribute. Anyways, we close out, so we could distribute by volume, by weight, by quantity, you know a few other things.

I go ahead and put it in the invoice number here like that and then I just hit process and post. Now the system posts through and we will receive an invoice, technically only to invoice but we receive it as well charge and it's thinking and it's posting. So, now that it's finishing up, what we want to do is go next into the item itself, not look at the post, just go into Cronus, go into items, then to the coffee mug and here in to navigate and history, entries, larger entries. yeah.

So now if I go into this purchase, I can see that the cost is 350 dollars, so I'll take that and click into it and I can see that we actually pay two and a half dollars for each cup and then $15 for Freight, the trade was really expensive but it increased the cost of the item and now you can see the total cost is here up to $350 and you can see that it actually affected the next transaction after it that now is 350 as well, so it's negatively listed and then we positively adjust it again.

This is that's why it has to be tricky if you want the cost to go all the way through the chain, if you negatively adjusted the item and then positively just it again like happened here, the system does not know to take this cost here, because in essence you might have lost it or it might have broken and then you might have positively adjust to something else, somebody might have given it to you. That's why when you're positively adjusting you must put in the cost manually, but if there would have been just a sale, the cost of goods sold would have updated transfers, transfers would have updated through etc.