Sell Method Calculation:There are two types of inventory items in the software: materials and supplies. Materials are inventory items that are sold for a profit. When materials such as auto parts are purchased, their cost is reported as cost of sales. When they are sold, the transaction is reported as sales.
Inventory counts automatically decrease when parts are sold, and items will automatically appear on reorder lists when quantities dip below reorder points. Counts automatically increase when shipments are received.
Inventory at the location level consists only of the materials and supplies stocked by individual shops. Each location may choose to stock or not stock any item in the master list or catalog. Location inventory lists are therefore subsets of the master materials and supplies lists.
Materials processing includes a built-in pricing calculator to set four sell levels. A customer contact can be assigned a buy level to match one of these sell levels. This enables automatic parts price reductions for qualified customers. You may also assign a selling level to materials in service packages.
Prices can be calculated using one of three calculation methods:
Margin
Cost Plus (Also known as Mark Up)
List Minus (using the MSRP price)
To use the calculator, you can enter sell prices and then lock them to calculate percentages, or you can set percentages and then lock them to calculate sell prices. The lock status is saved with each item, and used during automatic price updates.
Sell Method Calculation:
Cost Plus - Also known as mark up, is the method used to establish a selling price by multiplying the cost of an item by a percentage. If my cost is $100 and I multiply it by a 50% markup ($100 x 50% = $50) I will add $50 to my cost to arrive at a selling price of $150.
Margin - Is a true gross profit calculation which establishes a selling price based the on the percentage of profit in the sale. Margin = Profit / Sell Price. To establish a selling price from cost it is calculated using the following formula: Selling Price = Cost / (1- (Margin/100)). Using a $100 cost and 50% margin my selling price would be $100 / (1- (50/100)) = $100 / .50 = $200. This is the industry accepted standard and is what is used to calculate profit on an income statement by your accountant.
List Minus - Is a percentage calculated from MSRP and has no relation to cost price. If the MSRP is $150 and I apply a list minus 50% the selling price would be $150 - 50% = $75.