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Former Member
Feb 17, 2009 at 02:03 PM

Cost Of Sales

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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