Business Value 

Standard Microsoft Dynamics 365 for Finance and Operations provides several components that are used in the area of pricing, inventory valuation and margin control. But it does not provide an integrated solution with which you are able to generate base sales price lists based upon a given purchase agreement and costing structure which also is used for margin control.

The Cost to sales price calculation feature of Dynamics Price and Margin Management offers you the following possibilities:

• Calculate the sales price in a price adjustment or discounted prices in a retail discount based upon a given purchase trade agreement with flexible markup for cost and profits.
• Calculate the sales price in sales price trade agreement based upon purchase price and discount agreements, with flexible markup for costs and profits.
• Generate multiple commercial cost price levels or coverage levels which can be used as a base for margin control.
• The cost price information which was the base for the applied sales price on the order, is stored on the order. Where standard Microsoft Dynamics 365 for Finance and Operations cost price information could change after a inventory month end closing routine, our solution will lock the cost price to the order line. The gives you the possibility to make margin bonus agreements with your sales employees without having to discuss with them that the cost price changes after they sold the goods.
• Compare retail price adjustments or discount lists, in order to see which prices and margins went up or down after activating new purchase agreements or changes in the costing structure.
• Flexible setup of cost and coverage markup structures
  • determine what the base is for a charge
  • charge over charge
  • date effective
  • support of retail categories
  • determine whether charges should be journalized or not
• Get insight whether you should take action or not by using the cost to sales price workspace. It will inform you about expiring price lists, inactive price lists which should have been activated and more...

The picture below shows an overview of the flow of calculating a sales price.

The calculation all starts with a purchase trade agreement or if not setup the purchase price on the item. Then it will look a the cost component values to determine which financial purchase and/or commercial charges should be added and from there it will add the sales charges and the margin factor or value, which are taken from the sales markup.  

Global process overview

In Microsoft Dynamics 365 for Finance and Operations there are two price and discount mechanisms. The legacy engine used in Dynamics 365 Supply Chain Management, which calculates the sales prices and discounts based on sales trade agreements and in Dynamics 365 Commerce the retail price engine is fetching the sales prices from either sales price trade agreements or price adjustments and for the discounts they fetch them from the specific retail discounts tables.

For both engines we have enabled the possibility to use our cost to sales price engine to calculate the sales price. Both in the sales price trade agreement and in the price adjustment the user has the option to calculate the sales price and store all the cost and margin related information in the agreement line.

 Create price list for new products

• create purchase price and line discount trade agreements for the new vendor or item and set the from date.
• add the products to a price list (sales price list or price adjustment)
• execute the cost to sales price calculation function, this will calculate the price and it will store all cost and margin related information in the agreement line.
• enable the price adjustment or post the trade agreement journal for the sales price list.

Update of existing price lists

When a vendor sends an update of an existing price list which will become effective in the future:

• create a purchase price discount journal and add the products to the journal Use the find and close function to retrieve existing trade agreements which will set the end date based on the start date of the new agreements and post the journal.
• create a new price adjustment and use the Copy from function to copy all the items from the previous price list or create a new sales price list and add the products from an existing one (current sales price list).
• execute the cost to sales price calculation function. The price is updated.
• use the Compare retail price and discount agreements form to evaluate the effects on price and margin and take action where needed.
• enable the new price adjustment or post the new trade agreement price list
• in case of a price adjustment go to the previous price adjustment and set the expiration date to prevent that the two price lists will become active on the same day. In that case the system will apply the lowest price.
• in case of sales price lists go to the previous price list and set the to date to prevent that two trade agreement price lists will become active on the same day. In that case the system will apply the lowest price.

Create a sales order / sales quoation

• The system will search for a valid sales price agreement and if and the agreement contains pre calculated cost and margin info, this info will be copied to the order line. If no cost and margin info was found and the Automatically create a cost / sales price line parameter is enabled the system will calculate all cost and margin values on save. For more info see
• It will check whether coverage charges have been setup in the Sales price markup, that need to be added as charges on the order lines.
• It will execute the margin check against the cost or coverage level defined for the current worker.

Create a purchase order

 When an order line is created

• The purchase and discounts price are fetched from the trade agreements
• The charges that influence the item cost are retrieved from the Cost component value setup and are added to the order.
• When the Use V2 and Enabled on purchase order parameters are enabled the breakdown of the calculation can be shown via the Show cost components option on the Price and margin management tab.

When a RFQ is accepted the purchase order is created and the charges from the RFQ are added to the purchase order line. When updating the quantities in the purchase order line it will not look at the current cost value setup but it will use the structure inherited from the RFQ.

Create a direct delivery purchase order

When a purchase order or direct delivery is created manually directly from the sales order the cost and margin information is not retrieved from the price adjustments anymore but is calculated based on the linked purchase order.  On the purchase order also the coverage and sales margins are shown.

In this way it is possible to calculate a more specific margin for this sales order. This can come in handy when selling goods to a customer for which you agree a specific purchase price with the vendor.

When the purchase price is updated the margins on the linked sales order are updated.

In case of a direct delivery it is possible to setup a specific Delivery term for direct delivery on the vendor. If set this will be applied to the purchase order when creating a direct delivery.

When a purchase order has been created from a sales order before a valid price adjustment was retrieved there is no cost and margin information record present on the sales order to store this data in. On change of the quantity in the sales order or when the prices and discounts are recalculated a link is established and the purchase data will be reflected in the cost and margin information on the sales line.

Components used in the cost to sales price calculation process

Sales price lists (1)

When working with non-retail orders price adjustments can not be used. Instead sales trade agreement journals are used to create sales price agreements. In order to be able to use the cost to sales price calculation logic a Sales price list (Sales and marketing > Prices and discounts) has to be present on the journal line.

The following fields on the Sales price list are relevant in the cost to sales price calculation feature:

The easiest way to add products to a sales price is list is to click the create button:  a new trade agreement journal is created and the values from the field group Journal line defaults are initiated to the journal lines, add the products that needs to be calculated.

The functions Edit and Delete,  selected lines also opens a trade agreement journal.

If there is an open trade agreement journal for the selected sales price list, the user gets a dialog with the possibility to select one or create a new journal.

With the function Revise it is possible to mass update the following values of the selected lines:

• From date
• To date
• Site
• Warehouse
• Currency
• Find next

The function Copy, the selected lines will be copied to another sales price list without execution of the cost to sales price calculation. The Currency, From date, To Date, Party code type and Account Selection are initiated from the destination sales price list.

For all of these functions it will use the trade agreement journal line form the sales price list.

Via the menu option Trade agreement journals all posted and non posted journals which have been created from this price list can be accessed. In the fact box on the right, open trade agreement journals are shown with the possibility to delete them without having to delete the lines in the journal first.

Alternatively it's possible to create a trade agreement journal from outside the sales price list and enter the sales price list manually on the lines. Those trade agreement journals are not shown from the sales price lists, but the products will appear in the price list.

Price adjustments (1)

When you are working with retail sales orders, a Price adjustment is can be used as an adjusted base sales price list  and is used to store the sales price and cost price information that is used during the margin check.

Via the Price group button on the header it is possible to determine for which group of customers or stores the Price adjustment is applicable.

The following fields on the price adjustment are relevant in the cost to sales price calculation feature:

Add products to Sales price list or Price Adjustment

When you insert a product via the Add button the cost to sales price calculation is executed directly. When products are added via the Add products button the function is not executed and the line will be marked with an information indication.

In that case you have to select all lines and use the function Cost / Sales price calculation. This function has the following options:

By default the function Cost/Sales price calculation can only be executed for disabled price adjustment and agreements. When the Dynamics Price and Margin Management parameter Enable cost /sales price calculation on enabled offers is enabled, this function is also available for agreements with status Enabled. 

Calculation Errors

When the system is not able to execute the calculation successfully the lines with an error are marked with an error symbol. Click for more info about the errors on the View infolog button.

When there are lines with errors it is not possible to enable the price adjustment or to post the trade agreement journal for the sales price list. On the tab Ignored agreement validations, in the Dynamics Price and Margin Management parameters it is possible to setup which error's are not blocking for enabling the agreement. 

The filter dialog gives the possibility to filter on the following issues:

When the cost to sales price calculation has been executed it is possible to view all cost components via the Show cost components button.

Cost to sales price calculation engine (2)

The first step within the cost to sales price calculation is to calculate a net purchase price. It will try to find a purchase trade agreement and if not found it will use the purchase price defined on the released product.

When searching the trade agreements it will use the following variables:

The second step is to determine which cost components can be found in the Cost component value setup that will be part of the cost price of the item and which commercial cost components are added.

Except for the quantity and the unit it will use the same variables. In addition it will look for the delivery term of the vendor.

In the third step it will look in the sales markup that is set on the price adjustment header to find the coverage charges, the margin factor and the rounding settings.

In this calculation the system will apply a unit and currency conversion between purchase unit and currency to the inventory unit and ledger currency (MST) and if the price adjustment has a different unit and currency it will convert again.

All calculate values are store in tables that are related to the price adjustment. This makes it possible to use them for future analysis and to keep track on how a sales price has been calculated.

It is also possible to execute the Cost / Sales price calculation for more than one price adjustment or discount. This can be done via the menu item Cost / Sales price calculation in the Retail module (Retail > Pricing and Discounts) or from the Cost to sales price calculation workspace.

In addition to the parameters which have been desribed in Add products to Sales price list or Price Adjustment, the trigger parameter can be used to only process items for which a trigger has been created.

This function can be handy when you want to recalculate update all items of a specific vendor across multiple price adjustments which also contains items of other vendors which you do not want to recalculate. 

Similar functions ares available for the recalculation of Sales price list lines (Sales and marketing > Periodic):

• Recalculate existing sales price list lines
  • Selects lines of sales agreements, creates a trade agreement journal per sales price list and executes the cost to sales price calculation logic.
  • Optionally you can post the trade agreement journal automatically
  • By enabling the trigger parameter, only for items where a trigger has been set will be processed.
• Recalculate existing and close sales price list lines
  • From date: number of days determines the from date (= execution date + number of days) of the new agreement lines.
  • Selects lines of sales agreements, creates a trade agreement journal per sales price list, executes the cost to sales price calculation logic for the newly created records and uses the find and close logic to close the existing agreements. The existing records will be closed one day before the from date of the new record.
  • Optionally you can post the trade agreement journal automatically
  • By enabling the trigger parameter, only for items where a trigger has been set will be processed.

Sales order / Sales quotation (3)

When an order line is created the retail price engine will determine the unit price. It will search for trade agreements and if not found it will apply the unit price defined on the released product.

Then it will search for price adjustments and if lower it will apply that one.

Based on the Sales price markup that is defined in the applied price adjustment it will also check whether coverage charges have been setup that need to be added as charges on the order lines. If found they will be added and marked as APC Inserted:

The applied cost and margin information is shown on the Price and margin management tab of the order.

This means that in order to be able to show the calculated cost and coverage levels in the Price and margin management tab based on the applied price, a price adjustment or trade agreement has to be found.

Which cost price level(s) are visible on the order line is controlled by the Price margin worker group that is setup on the worker attached to current user that is looking at the order.

There is another option to get multiple cost and coverage levels added to the order lines. By enabling the Automatically create a cost / sales price line  parameter the system will execute the cost to sales price calculation on save of the order line. See the pre requites for more information.

It is also possible to do a recalculation of the cost and coverage levels on the order line. With this option the user has the possibility to fetch a different purchase price from the trade agreement or select a specific purchase agreement as base for the calculation.

Margin check (4)

On save of the order line the standard Microsoft Dynamics 365 for Finance and Operations margin check is executed. When you have setup Margin management of Dynamics Price and Margin Management the margin check can be executed against the cost or coverage level of the worker attached to the current user that is looking at the order.  

When the system was not able to find an agreement with calculated cost or coverage levels to check against and it will fall back to the standard Microsoft Dynamics 365 for Finance and Operations routine of finding a cost price to validate the margin.

Purchase order (5)

When you add the item to the purchase order the system will look at the cost component value setup to determine which miscellaneous. charges should be added to the order line.  

Two new columns have been added to give the user information about which charges will have effect on the cost price (2) of the inventory transaction and in case of a percentage whether percentage will be calculated including (1) the line amount or only the charges shown the pane on the right (3).

APC Inserted (4) is an indicator showing which lines were created automatically as result of the cost to sales price calculation.

Charges are automatically recalculated when delivery date, delivery mode or variant is modified on the order.

Cost simulation

Accounts payable > Setup > Charges Setup > Commercial cost setup > Cost simulation

This form is intended for testing purposes. This also means that there are no validations added to the lookups of the fields and that you are able to enter combinations of values that normally are not allowed.

When you click Ok the cost to sales price calculation engine will calculate all the values and present it to you in a similar way as if you would have opened the Show cost components form from the price adjustment.

When you enable the Keep purchase order parameter the purchase order that is created during the cost to sales price calculation is not deleted and can be viewed in the purchase order list page. The system will generate a purchase order journal with a random purchase order id. In case of a duplicate it will throw and error and you have to execute the calculation again.

When you enable the Use purchase price parameter the price fields and discount fields from the dialog are used instead of searching for a trade agreement or purchase price from the item.

When you enable the Use vendor defaults the system will not use the Currency, Delivery terms, Quantity and Unit from the dialog but from settings on the selected Vendor and item.

Pre requisites

With the introduction of version 10014.38.1400 the prerequisite to use price adjustments as price lists containing the calculated cost price and coverage levels has been dropped. Like in the price adjustment it is now also possible to calculate those cost price and coverage levels for sales price trade agreements. 

When no price adjustment or sales price trade agreement is applied, there is no base for a margin check based on a certain cost price level. The margin check will fall back to the standard Microsoft Dynamics 365 for Finance and Operations determination of the cost price of the item.

With the feature  Automatically create a cost / sales price line, it is possible to calculate the cost price levels for order lines even if there is no retail price adjustment or sales price trade agreement found. 

By enabling the Automatically create a cost / sales price line parameter the system will calculate all cost levels or the created order line on the fly when the line is saved. If no price adjustment or sales price trade agreement with pre calculated cost price information has been found, the system will execute the cost to sales price calculation base on the information stored in the sales line. To feed the engine it will take the following data from the sales order instead of from the price adjustment header:

• Order header
  • Sales price markup. The sales price markup is initiated from the customer if set. When a customer object is selected on the sales order header which has a sales price markup, it will override the value initiated from the customer.
  • Price group (Non-Retail only)                    
• Order line:
  • Delivery / Confirmed delivery date: Purchase date for finding the purchase trade agreements and cost value setup:
  • Site/Warehouse for finding the purchase trade agreements

For finding the sales price  markup the system will search in this order and it will stop searching when a sales markup is found:

• Non-Retail:
  • Sales price markup on sales order header
  • First valid sales markup with the same price group of the sales order header
  • Sales markup on customer
  • First valid sales markup with the same price group of the customer
  • Default sales price markup from Price and Management parameters
• Retail:
  • Sales price markup on sales order header
  • Sales price markup on customer
  • First valid sales markup with the same price group of the customer
  • Default sales price markup from Price and Management parameters

Although a price group is present on a sales order header, in case of Retail orders this field is ignored, like in standard APCAX%% logic (first search in on-hand cost value and then fall back to the cost of the item).

FAQ

Setup

Specific setup related to the features are described in the topics it self.