PROFIT ESTIMATOR

A2000 ONLINE SUPPORT DEPARTMENT

KNOWLEDGE BASE

DESCRIPTION          Why Is the Profit Estimator Cost in The System Not Accurate as Per the Stock Ledger?

The Profit Estimator allows user entering a transaction in Sales Module to know the estimated profit that transaction makes. It is not a profit analysis to view vis-à-vis accurate stock cost.

1. IS THE COST IN ESTIMATOR THE SAME AS PRODUCT COST?

No, it is not the same as Product Cost. E.g., a sales quotation or order does not cut stock, or may not be in stock or it could be fulfilled at a different time from the order date at another cost. The actual cost can be determined only at the point when stock is actually cut from the inventory (that is based on FIFO or Weighted Average Costing as the case may be).

2. WHY IS THIS CALLED AN ESTIMATOR?

Profit Estimator, usually used in sales quotation and orders does not provide actual stock cost, but at best, an estimate. In order to know the profit estimate, the system used the Prevailing Weighted Average Cost (PWAC) as a "cost basis”.

PWAC is a static field in the product master that is constantly updated, as new stock with new costs is received. This field is always based on the latest date (today’s date). It is not sensitive to transaction dates. If you use it to view a past transaction, the latest cost will be used to auto-compute the transaction’s profit. That is why it is called a Profit Estimator.

It is useful when one enters a transaction now (today), and the system returns the PWAC as on today. It is operationally rare, to enter an order or quotation transaction today but date it in the past or future (where the cost will differ from today).  

3. WHY IS PROFIT IN ESTIMATOR NOT USED AS A PROFITABILITY GUIDE?

Let us study the logic of how the PWAC works in Profit Estimator. Example: -

NOTE: Here is the difference now - if you edit CO-4567 on 20-11-2023, the system will now show the PWAC as $19.00 instead of $23.59. This is why the PWAC is not to be taken as the actual cost from Stock Ledger.

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