Products: Purchase Price and Cost of Goods Calculation

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Products: Purchase Price and Cost of Goods Calculations

eoStar handles the prices and the cost of goods through a variety of ways. Prices are essentially the amount the item is to sell. Cost is the amount of money used to acquire an item. The cost of a product for the company in eoStar is devised by three methods, the manual entry, auto-cost, or FIFO calculation. If the FIFO plugin is installed, FIFO is the only method used for costing. For more information, see FIFO Plugin. Both the manual entry and auto-cost methods are calculated at the product level, which means that the cost for an item will be the same across all warehouses in a multi-warehouses database.

The selling of products is dealt with through the use and creation of the front line prices, customer special prices, etc. For more information on how products are priced for customer orders, see Price Calculation.

Cost of Goods

If the FIFO plugin is not installed, cost for parts and products can be maintained via “manual” and “auto-costing”. The simplest approach is to maintain a manual cost. This means that you enter a static cost on the product record, and that cost is then used to calculate the cost of goods on various transactions (e.g. orders and product transfers) and reporting purposes.

eoStar can also calculate an auto-cost. Auto-cost uses the average of the last three received purchases to calculate the cost. Additionally, any freight charges applied to the purchase are prorated across the purchased products based on weight and quantity. If no weight is associated with the product record, then freight costs are not allocated to that product.

  • In addition, customs entry charges (duty, tax, and other charges) are also prorated across the line items based on extended quantity. These charges, like freight charges, are taken into account when calculating the cost of the purchase.

Also, there is a cost overhead percent on the product and part records. This value increases the cost figure displayed during order entry and price rule maintenance. The overhead percent accounts for costs above and beyond the purchase price and freight of the product (e.g. storage costs).

  • The auto-cost field will still update even if the Use auto cost check box is unchecked but eoStar will not use it for cost calculation.
  • Businesses that require the importation of goods from foreign suppliers.

Order Entry

During order entry in non FIFO databases, the product's auto cost or manual cost will be allocated to the sale based on the setting of the product record.

In a FIFO database, for performance reasons, the cost of goods will initially be the Auto-Cost shown on the product record, but running the Recompute FIFO Costs tool will adjust these line-item costs to the correct FIFO layer costs.

How Prices Are Calculated During Purchase Entry

During purchase entry, the price used the amount listed in the Laid-In-Cost Manager, followed by the supplier’s assigned price for the product (located on the Product Records Supplier Panel), or the price entered on the most recent purchase of the product from the chosen supplier.

  • The purchase price can be overridden during purchase entry.
  • Freight charges for a purchase can be entered when the purchase is “received” via the Purchase Tracker.
  • Customs entry charges (duty, tax, and other charges) can be entered when a purchase into a bonded warehouse is “received” via the Purchase Tracker.

The form which supports the addition and maintenance of product information, also allows for the assignment of multiple supplier aliases and prices for the same item. If on file, then supplier aliases and prices are displayed during purchase entry.

Costs For a Purchase

The following is the formula taken to populate the costs added to a purchase when given a supplier, warehouse, and expected ship date in a New purchase. All of these default to zero if no costs are discovered.

  • Item Purchase Price:
  1. Finds the most recent laid-in cost.
  2. If no laid-in cost is present, then it finds the item in the supplier aliases table for this supplier (Product Records Supplier Panel).
  3. If there is no alias, it finds the item in the supplier purchase history (the last purchase line for this supplier with this item on it) and use that cost. Purchase must be reconciled.
  • Freight, discount, deposit:
  1. Finds the most recent laid-in cost.
  2. If no laid-in cost is present, it uses the item record to discover a default (Estimated Freight, Standard Discount, Supplier Deposit fields).
  3. If there isn’t a value in the item record, it finds the item in the supplier purchase history (the last purchase line for this supplier with this item on it and use that freight, SPA, deposits).
  • Excise tax:
  1. If the supplier has Pay Excise Tax To Supplier checkbox set on the Supplier Beverage Panel, the excise tax defaults to zero.
  2. Finds the most recent laid-in cost.
  3. If no laid-in cost is present, it uses the excise tax associated with the excise tax class of the item (located on the Product Records More Panel under Tax Class).
  4. If there is no excise tax associated with the item, it finds the item in the supplier purchase history (the last purchase line for this supplier with item on it) and use that excise tax amount.
  • Cost components:
  1. If the database Automatically Estimate Using Previous Purchase Cost Components checkbox is off on the Configure Cost Components Panel, the cost components default to zero.
  2. Finds the most recent laid-in cost.
  3. If no laid-in cost is present, it finds the item in the supplier purchase history (the last purchase line for this supplier with item on it) and use the that amount for the cost component.