Calculating Gross Profit

(0) Share

Report

Posted on by Community Member

Does anyone have problems calculating gross profit in Great Plains 10 (not 2010)?

Our company does custom manufacturing and we can never seem to get an accurate gross profit calculation on custom products. Our inventory valuation method is FIFO. When orders are written and processed to invoices, GP assigns the last cost of that item and not the actual costs.

We have tried drop ships and linking orders to purchase orders to no avail.

Appreciate any ideas.

*This post is locked for comments

I have the same question (0)

All responses (9)

Answers (0)

Frank Hamelly | MVP... 46,625 Super User 2025 Season 2 on at

Like (0)

Report

What GP does in a FIFO valuation environment is use the cost of items starting with the earliest receipt layer that has a quantity remaining and moves forward from there through subsequent receipt layers if the first layer does not have sufficient quantity to satisfy the invoice quantity.

In the case of custom products, assuming there is only one receipt layer per custom product, the cost would always be that cost reflected in that (last) receipt layer.

Are you using GP Manufacturing?

Was this reply helpful? Yes No
Community Member on at

Like (0)

Report

Are you using FIFO Perpetual orFIFO Periodic?

FIFO Periodic uses the layering system but items are valued at their current cost.

Ian.

Was this reply helpful? Yes No
Community Member on at

Like (0)

Report

No, we are not using GP Manufacturing.

We are using FIFO Perpetual.

Was this reply helpful? Yes No
Frank Hamelly | MVP... 46,625 Super User 2025 Season 2 on at

Like (0)

Report

How do you derive your manufacturing cost on custom items? is manufacturing outsourced?

Was this reply helpful? Yes No
Richard Wheeler 75,848 Moderator on at

Like (0)

Report

The only way you can get a one to one relationship with the cost of an item is to have the item tracked by serial number or lot number. Otherwise, if you are using LIFO or FIFO Perpetual it will grab the cost from inventory based on what is left in inventory. So if you had 100 widgets in stock and 50 came in first at $5.00 and another 50 came in at $10.00 and you are on FIFO and then have two sales orders both for 50. At posting time GP will pull the cost of the FIFO quantity which may not match the cost when the order was originallly entered. The profit margin of the two orders taken as a whole will be correct but taken indivually, one will be too high and the other too low.

Was this reply helpful? Yes No
Community Member on at

Like (0)

Report

Frank, we derive the cost to manufacture from the vendor who provides us a price. Yes we outsource the manufacturing of some of our products.

Richard, I understand exactly what you are saying but I'm not certain that method would work for us.

It appears that when a purchase order is created and committment made to the associated sales order for the custom product, the cost is correctly associated and gross profit can be accurately calculated. However, at the point the sales order becomes an AR invoice the FIFO perpetual cost is used to post to the GL. Crazy, I know, but that's what happens.

There has to be a way around this.

Was this reply helpful? Yes No
Suggested answer

Dan Liebl 7,320 on at

Like (0)

Report

The only way around (that I know) it is to use lot or serial numbers on the FG. You could assign the lot as the SOP order and then select it during fulfillment. It ties the costs to for the correct order. Creates some extra steps, but gives the gross profit per order.

Dan Liebl, CMA CPIM

OTT,Inc

dliebl@OTT-inc.com

Was this reply helpful? Yes No
Victoria Yudin 22,769 on at

Like (0)

Report

Pete,

That is something that I have run into quite a bit - people think that linking a sales order to a PO overrides the FIFO logic. It does not, it simply makes sure that no other order can grab the inventory on that PO, as it's already 'spoken for'. This only applies to quantities, though...nothing to do with cost.

Richard and Dan are exactly right - the only way to do what you're asking is to use serial numbers or lot numbers so that you are able to uniquely identify each 'cost layer' and choose which one to use for what sale.

Was this reply helpful? Yes No
Community Member on at

Like (0)

Report

Its really disappointing that GP does not associate the sales order and purchase order together and use the cost on the purchase order when posting the AR invoice. Seems this would be the most logical method but I guess that's too easy.

This ends up requiring a month end inventory adjustment reviewing all customer and vendor invoices. FRUSTRATING!!!

Was this reply helpful? Yes No