The computation of Est. Gross Profit on Sales Orders is Est. Gross Profit less Est. Extended Cost. The data in Est. Extended Cost field is dependent on the Cost Estimate Type specified in the item record. If an item is drop shipped and does not have a quantity on hand across all Locations; the system will calculate a 100% Gross Profit rate if the designated Cost Estimate Type is Average.
This is because the unit average cost that is derived by the Est. Extended Cost field of the Sales Order is computed based from the quotient of the total on hand value divided by the total quantity on hand of an item.
Note: When an item is drop shipped; the system does not recognise any increase in its quantity on hand because the purchased quantities are presumed to be shipped directly from the supplier to the customer.
In order to set the appropriate Est. Extended Cost for the Drop Ship Items, the user may either:
- Set a different default Cost Estimate Type other than Average in the item record under the Sales/Pricing tab. A more representative type would be based by the Purchase Order Rate.
- In the line item level of Sales Orders, select a different Cost Estimate Type other than Average.