Set up item pricing

• 10 minutes

In Supply Chain Management, you can set up a product's price by using costing versions or by manually specifying base prices on the Purchase, Sell, and Manage cost tabs of the Released products page.

Product purchase price

You can predefine a product's purchase price in several different ways. The basic approaches include a standard purchase price that you can manually specify or automatically update based on invoices. Other approaches to a product's purchase price are covered in the context of purchasing, such as the use of purchase price trade agreements and purchase agreements.

As the simplest approach, you can define a product's standard purchase price in terms of its default purchase unit of measure. It represents a company-wide purchase price that acts as the default on a purchase line when other sources of pricing information do not exist. This standard purchase price can be manually specified or automatically updated by the last purchase invoice.

Product sales price

You can predefine a product's sales price in several different ways. The basic approaches include a standard sales price that you can manually specify or automatically calculate. Other approaches to a product's sales price are covered in the context of a sales order, such as the use of sales price trade agreements and sales agreements.

As the simplest approach, you can define a product's standard sales price in terms of its default sales unit of measure. It represents a company-wide sales price that acts as the default on a sales line when other sources of pricing information do not exist. This standard sales price can be manually specified or calculated, and the calculations differ for a purchased product versus a manufactured product.

With a purchased product, you can use the product's standard purchase price and a specified markup percentage (or contribution ratio) to calculate its standard sales price. This price is continuously recalculated based on changes to the product's standard purchase price as the result of the last vendor invoice.

With a manufactured product, you can update the standard sales price by activating a product's sales price record, where the sales price is calculated based on a cost-plus-markup approach for its purchased components, routing operations, and overhead formulas.

Costing versions

If you are not using the manual specification of base prices, you can set up costing versions. Costing versions let you create distinct user-defined environments for maintaining and calculating planned costs for products. Access the Costing version setup page by going to Cost management > Predetermined cost policies setup > Costing versions.

You can enter and maintain planned products' costs, cost categories' rate, indirect costs' rate, and ratio on the Costing versions page. The BOM calculation that is implemented on the costing version calculates and appends the manufactured product planned costs to it. This process also applies to purchased products if the purchase overhead is set up to be calculated in the costing sheet.

You can activate the created costs that have a status of Pending, discreetly or in bulk, to make them effective and apply them to inventory cost and production costing.

Attributes on costing versions enable constraints of content and cost calculations in that version. You can analyze and maintain products' costs in a costing version individually or for each costing version. Active cost history is kept with full details.

Costing versions are available on all types of costing methods. However, when standard cost is enabled, certain principles on the Costing version setup page are restricted and can't be changed.

Scenario

The operating manager wants to build up next year's standard costs so creates a new dedicated costing version for the standard costs. Various contributors populate the costing version with next year's purchase costs, cost category rate, and indirect cost ratios.

A BOM calculation, which is implemented on the costing version, calculates and inserts the standard costs for a manufactured product in the version. The calculation is based on the costing version cost set. The operating manager reviews the content of the costing version, corrects as necessary, and then locks the costing version when satisfied with its content.

At the beginning of the next year, the operating manager does a mass-activation of the costing version's costs, making them effective and applied for inventory valuation and production costing for that year.

Costing version types

The three costing version types are:

• Planned cost - Use this costing version for products that use a cost flow assumption under actual cost (FIFO, Weighted average, or LIFO).
• Standard cost - Use this costing version for those products that use the standard cost costing method and all other products that roll up directly to a standard cost-based BOM.
• Conversion - Use this costing version when you convert a product from a nonstandard cost costing method to the standard cost costing method.

You can select the Planned cost and Standard cost costing version types on the Costing versions page. Also, you can create the Conversion costing version on the Standard cost conversion page.

Costing version types - BOM calculation

A costing version can also contain data about product sales prices or purchase prices for BOM calculation purposes only.

A BOM calculation can calculate a sales price for manufactured products and can also generate an associated sales price record within the costing version.

A BOM calculation with planned costs can be based on product purchase price records within the costing version instead of product cost records. The product purchase price records must be manually entered.

Item price page

You can use the Item price page to view cost history and maintain product cost records for a single product. To access the Item price page, go to Product information management > Products > Released Products. On the Action tab select Manage costs > Set up > Item price. Typically, you would use the Item price page to create cost prices for a new product and use the Costing versions page to create cost prices for existing products.

Data maintenance includes entering pending costs for a purchased product, calculating pending costs for a manufactured product, and activating pending cost records. Activating a pending cost record changes its status from Pending to Active and changes its effective date to the activation date. The Item price page displays pending and active cost records on different tabs. Different cost records for a product could reflect a different costing version, site, effective date, or status.

You can also use the Item price page to view and maintain information about product sales price records and product purchase price records in a costing version. To generate a product's sales price record, use the BOM calculation page to calculate a product's sales price.

The following screenshot shows the Active prices tab of the Item price page.

This tab includes the following fields:

• Price type - Shows whether the information applies to a product cost record, a product sales price record, or a product purchase price record.
• Version - Costing version for the record.
• Name - Name of the costing version for the record.
• Site - Shows the applicable site for the record. Product cost records must be maintained by site.
• Price - Enter the pending cost, display the calculated pending cost for a manufactured product, or display the active cost for a cost record.
• Price quantity - Shows the quantity that is related to the product cost record. A product's cost is typically expressed for a quantity of one. However, it might be expressed for every 100 or 1000 to handle decimal precision issues.
• Price charges - Enter pending costs for charges for a purchased product, calculate the charges for a manufactured product (based on the amortization of constant costs), or display the charges for an active cost record.
• Charges quantity - Shows the quantity that is related to the product's miscellaneous charges. The miscellaneous charges are amortized over the specified quantity.
• Incl. in unit price - Shows if miscellaneous charges are included in the product's unit cost. Miscellaneous charges must be included when the costing version reflects a standard cost type.
• Unit - Displays the unit of measure for the cost record. A product cost record must be expressed in the product's inventory unit of measure.
• From date - Shows the intended effective date for a pending cost record. The date might be defaulted from the costing version.
• Blocked - A system-assigned flag that indicates that an active cost record can't be maintained or that the blocking flag for the costing version has blocked changes to pending cost records.
• Calculated - A system-assigned flag that indicates that the cost record contains a calculated cost for a manufactured product.
• Log - A system-assigned flag that indicates that an Infolog exists for the cost record. You can view this flag by selecting the Log button. The Infolog contains warnings that are generated by the BOM calculation for the cost record.

Sell and price multiple items as a bundle

Your organization can utilize product bundles to group items into product bundles to price and sell together. This speeds up the order entry process and ensures that the correct items are sold and priced together.

To enable this functionality, go to the Feature management workspace. In the Filter field, search for Product bundle. Select the feature and select Enable now. After the Product bundles feature has been enabled, you must first set up product bundle components to create product bundles. Each component item must be a released product. To access released products, navigate to Product information management > Products > Released products. To set a released product as a bundle item, you must set the Product bundle and Production type. On the released product record, expand the General FastTab and set the Product bundle option to Yes. Next, navigate to the Engineer FastTab and set the Production type to BOM. Select Save.

To assign the component items to a product bundle, from the Action Pane navigate to Engineer > BOM > BOM versions.

Before you can generate a picking list, packing slip, or invoice, you must confirm the sales order. When the sales order is confirmed, the parent item is canceled and the unit price and discounts are distributed to the component items of the bundle. The sum of the component items must equal the price of the parent item.

Once the bundle has gone through the picking and packing process, it can be shipped and invoiced. The invoice dialog box shows the component items and the printed invoice only shows the parent item. Although after posting occurs, the invoice journal that is created does not include the parent item as its status is changed to canceled.

Activate pending prices

To activate a pending price for a product, select Activate. The Active prices tab includes the Activation date field, which shows when the price was activated. To activate pending prices for many products, use the Costing versions page.

If you select the Fixed receipt price field on the Setup tab on the Item model groups page, product receipts are always made at the price that is specified in the Price field under the Base cost price heading, and item issues are made at the current inventory value. Fixed receipt price can't be selected when you use the Standard cost costing method.

The price for a specific product is based on the number of units that are specified in the Price unit field. If the value is 1 or blank, the cost applies for one unit of the item. However, if you specify a value that is more than one or zero, then the price applies for this quantity of the product.

Scenario

You have purchased a box of 50 products, where the Price unit is 50. The cost applies for 50 units of the product. When you enter purchase order lines, sales order lines, or inventory journal lines, the unit price is automatically converted for the quantity that is given on the line.