Cost Of Sales
Hey Good People,
I have a client who is having problems with the calculation o Cost of sales.
The Client is a retailer who imports most of his products for local sale. Import and pricing is handled in foreign Currency - USD or EUR, whilst sales is in Local currency
The Company places and Sales Order say for 10 Items at 10 Dollars Each = 100 Dollars.
At time of Purchase order (01.02.09) and GRN (28.02.09) the Local Currency Monthly Exchange rate to the dollar is say 10. Therefore the Equivalent in Local currency (LC) at the time of placing the order is 10 items at 100 (LC) = 1000 (LC). At the GRN Stage, landed Costs are recorded in Local currency = Total is 500 (LC)
Thus the total Item cost in Local currency is Purchase Price (1000) + Landed Costs (500) divided by qty (10) = 15 LC Per Item
All this is recorded within SAP. The problem occurs on Purchase invoicing and recoding/adjustment of Cost of Sales (Delivery/Invoice Item Cost).
As the goods are already in the store, they begin sales 01.03.09 - sales price marked up appropriately to 25 (LC).4 items are sold and the Cost of Sale for this Sales Delivery/Invoice is 6*15 = 80 (LC). 4 Remain in Stock
The client is then sent the Purchase Invoice to pay on the 05.03.09 - here the Exchange Rate has risen to 11. Thus the Invoice is for 1100 (LC) - Equivalent to 100 USD as the order and GRN. This is paid with no problem and SAP Makes Appropriate adjustments - This will reflect in the P& L and the variance reduces overall profitability
The problem that exists is the Sales Analysis Gross Profitability Report in SAP - by Items and by Customer. This takes the Values in the Invoices/Deliveries whose COS cannot can never be adjusted.
The only option would be to spread the additional cost to the other Items and this would result in some items being sold at a loss.
Take the Example above
4 items remain in stock - additional Cost due to Exchange differences is 100, Spread evenly to products = equals 25 added to Costs = New Cost is thus 40 (Old Item Cost plus revaluation). The selling price cannot be adjusted (need to remain competitive/consistent). Thus the remaining four are sold at a loss.
Has anyone encountered this problem ? Can anyone propose any Solutions/Workaround
Your input will be greatly appreciated
Regards,
Michael Mbiyu
SAP B1 Consultant
EIM Solutions, Kenya
Hi Micheal
Your problem is not uncommon, and one cannot expect a system to allow you to change the cost on sales afterwards as this would involve a lot of adjustments. This is normal behavior and the only workarounds would be to block imported goods from sale until the invoice has been processed, or to keep the exchange rate the same from the Goods Receipt to the invoice and allow the exchange rate difference to be absorbed when paying the invoice at the final exchange rate. This can be achieved by using the same date for the invoice as was used for the Goods Receipt.
Is there a reason why the dates of the GRPO and Invoice differ? Usually with imports a Pro Forma Invoice is issued in order to get bank and forex approvals prior to importing goods.
Let me know so I can better understand the timing difference in invoicing.
Kind regards
Peter Juby
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Check the following link
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check the documentation at
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Moderator: Please, read forum rules before postingHi Sashikanth,
Please send me the Configuration document for make to sales order.We are at Blue print stage need some docment for make to sales order.Plese send me the document it will will be very help full for me.
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Dear All,
Client didn't activated the Cost of Sales Accounting initially and preparing Profit & Loss Account by periodic Method for the last four year.
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VKIf you right click on an Invoice and choose "Gross Profit" it will give you a setting on how you want to calculate the Gross Profit for that invoice.
In the accounting point of view the "Base Price" should be "Item Cost" so that the Gross Profit will be (Net Selling Price - Item Cost = Gross Profit). This will give you the same Gross Profit amount between P and L and Sales Analysis Report.
However, SAP B1 gives the user the ability to select a different base price other than the Item Cost.
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See screenshot:
-Eric Alo-
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