Cost Bases and Cost Calculation Methods

The cost calculation methods that act as a cost reference for item sales prices allow you to calculate prices from values that are not maintained elsewhere in Microsoft Dynamics NAV. These item cost values are entered and maintained as cost bases. Cost bases in turn are assigned to cost calculation methods, which instruct the program how the item cost values for the assigned cost basis should be used as cost references. Once a cost reference is calculated, the program applies the pricing parameters that are defined on the sales price line to establish a sales price for the item.

Cost Bases

A cost basis represents a listing of item cost values. These values are obtained in one of two ways:

  • Item cost values can be manually entered if they come from a source outside of Dynamics NAV. For example, some industries publish standard market values for items on a regular basis, then distribute this data to companies to use when calculating sales prices.
  • It is possible to develop a codeunit that calculates item cost values from existing data within Dynamics NAV. For example, you could instruct the system to calculate an item's cost value by averaging historical item costs over a particular period of time.

You can set up as many cost bases as you want, each with its own list of item cost values. This allows you to maintain different sets of costing data that can be used in cost reference calculations.

Insights in Cost Bases

To give more insights on Cost Basis a Factbox is added to the Item Card and Item Variants which gives information on the used Cost Basis, Cost Value and Last Cost Value Date.

Cost Calculation Methods

The cost values of a cost basis may represent raw data that needs to be further refined before it is used as a cost reference for sales price calculations. This is particularly true if the item cost values have been manually entered, since a codeunit that is used to determine cost values can have calculation steps as part of the process.

To provide further instructions to the system as to how a cost basis's item cost values should be used, you set up cost calculation methods. Each cost calculation method is assigned a cost basis. Additional settings indicate how the values for the assigned cost basis should be used as cost references. For example, you might set up a date restriction that keeps the program from using any cost basis values from the current week.

The same cost basis can be assigned to more than one cost calculation method. This gives you the ability to use the same item cost values in a number of different cost reference calculations.

You must set up cost calculation methods if you want to calculate sales prices from cost bases. When sales price lines are entered, you have the ability to assign a particular cost calculation method as a cost reference. You can not assign a cost basis as a cost reference. Even in scenarios in which you do not require further manipulation of a cost basis's item cost values, you must still set up a cost calculation method that instructs the program to use these item cost values as cost reference amounts.

Cost Calculation Items

One noteworthy feature of cost calculation methods is the ability to define a cost calculation item. When a cost calculation method has an assigned calculation item, the program will use the cost value data for that item to calculate any sales prices for which the cost calculation method is assigned as a cost reference.

For example, a cost calculation method is set up with Item A as the cost calculation item. This cost calculation method is assigned as a cost reference for sales prices involving Item B. Whenever a sales line is created for Item B, Microsoft Dynamics NAV will use the item cost value for Item A to calculate a sales price.

You can further influence the relationship between a sales item and a cost calculation item by defining a cost conversion factor. This factor is applied whenever a cost calculation item is used to establish a cost reference. Using our previous example, if we had established a cost conversion factor of 5 units of Item A for every 1 unit of Item B, the program would multiply the cost value of Item A by 5 when determining a cost reference for Item B's sales price.