Calculating Cost Price and Margins

Calculating cost prices and margins to achieve your required margins while allowing your customers the best possible discounts.

Introduction

Cost Margin Calculation

Branch Average Cost

Replacement Cost

Max Of Branch Average Or Replacement

Example to check / edit price and margin in a Sales Order

Receivable Invoice Analysis Report


Introduction

Costs are calculated by different methods, as set out below. You need to know the cost of an item that you are selling, in order to ensure that you can achieve an acceptable margin on the sale price when you sell the item.

Managing your margins efficiently allows you to provide the best prices to your customers, while still retaining the desired profit margin on your sales.

Refer also to Set Automatic Margin Approval limits for Sales Orders.

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Cost Margin Calculation

Lentune uses the cost price on an item, and the applicable discount, to calculate the margin on sales.

Cost price can be obtained from a hierarchy of levels, depending on the settings in your Receivables Manager.

You can select one of two possible methods to calculate the cost margin.

This setting is located in the Receivables Manager > Cost margin settings section. The options are:

    • Branch Average Cost.
    • Replacement Cost.
    • Max Of Branch Average Or Replacement
IMPORTANT NOTE! Your site will already be set up to use one of these methods, please contact your Lentune support team to discuss the implications if you are considering changing these settings.

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Branch Average Cost

Branch Average Cost uses the priorities below to determine the cost price of an item. Therefore, if there is no value in the higher priority, the system falls back to the next level on the list.

    1. Branch Average Cost; (rebated for Product rebate). Refer to How Stock Rebates work.

    2. Contract Buy Price. (This comes from the Payable Contracts, and selects the best price if there are multiple Payable contracts). This is then rebate adjusted for the Product rebate.

    3. Last Purchase Price database-wide.

    4. Negotiated Cost.

    5. Standard Cost.

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    Replacement Cost

    Replacement Cost uses the priorities below to determine the cost price of an item. Therefore, if there is no value in the higher priority, the system falls back to the next level on the list.

      1. Contract Buy Price; (this comes from the Payable Contracts, and selects the best price if there are multiple Payable contracts). This is rebated for Product rebate.

      2. Branch Average Cost; (rebated for Product rebate). Refer to How Stock Rebates work.

      3. Last Purchase Price database-wide.

      4. Negotiated Cost.

      5. Standard Cost.


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    Max Of Branch Average Or Replacement

    Max of Branch Average or Replacement takes whichever is higher value of:

      1. The Branch Average Cost and;

      2. The Payable Contracts Cost.

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    Example to check / edit price and margin in a Sales Order

    If you wish to check or edit the price and check the margin for a specific line item in a Sales Order:

    • Go to Sales > Sales orders.
    • Select a Sales order.
    • Check the field Show cost price and margin.
    This will now display the Cost price and Margin% for items in the Sales order.

    If you wish to change the price for a line item in this Sales order, you can do so.

    • Click on the line to open the details screen.

    In the Edit sales order line:

    • Click Update customer price details.


     

    In the Update Customer Price Details screen, you can either:

    • Edit the price for this line in the Cost (margin report) field, or:
    • Enter the Margin required, and the new price will be calculated.
    • Click Confirm.

    • Click Save and Close.

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    Receivable Invoice Analysis Report

    The Receivable Invoice Analysis Report allows you to select different options to report cost margins.

    • Go to Receivables > Receivable Invoice Analysis Report.
    • Invoice - start date: Select the Invoice start date to report.
    • Invoice - end date: Select the Invoice end date to report.
    • Cost selection: Select from Cost Price Margin, Replacement Cost or Branch Average Cost. 
    • Click View report.


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    Last updated: 18 January 2023