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Diff between List Price and Item Cost in Inventory

Discussion in 'Oracle SCM & Manufacturing' started by robin, Sep 21, 2011.

  1. robin

    robin Forum Advisor

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    Could anyone explain the difference between List Price(List Price we enter while creating an item) and Item Cost(from Item costs navigation) ?
    Why and where would we use these two ?
     
  2. zargon

    zargon Community Moderator Forum Guru

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    List Price is the amount you charge customers who purchase the product. This value includes the Item Cost (the total expenditure to manufacture and package the product) plus markup to cover shipping and handling costs and provide a profit to the company. The two values should be different, even if you are a wholesaler. Basically:

    (List Price * number sold) - (Item Cost * number sold) == Profit (the amount the company makes after materials costs, labor costs, utility costs and shipping costs are paid)

    Raw material costs, wages, benefits, equipment, utilities, rent or mortgage payments, packaging costs and shipping costs all go into calculating the List Price of the item (those values add up to the Item Cost); the price is:

    (Item Cost * markup percentage) + Item Cost

    For example --

    Item Cost = $5.73
    Desired profit percentage (as decimal) = 0.22
    List Price = ($5.73 * 0.22) + $5.73 => $1.26 + $5.73 => $6.99
     
  3. robin

    robin Forum Advisor

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    So, List Price is Selling Price.I am a little confused here.In some site,I read the procedure for setting a selling price for an item.

    N : Pricing > Price List > Price List Set up

    This is the Navigation for that procedure.How is this any different from list price ?
     
  4. zargon

    zargon Community Moderator Forum Guru

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    It isnt, List Price and Selling Price should be two different terms for the same quantity.
     
  5. robin

    robin Forum Advisor

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    I am sorry I didnot understand.Could you Please elaborate ?
     
  6. zargon

    zargon Community Moderator Forum Guru

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  7. saurovroy

    saurovroy Active Member

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    Item cost is the manufacturing cost of the item. Say item A is being manufactured in company ABC. So manufacturing cost of item A is Item Cost.
    Item A is being sold to customer C. The price which is fixed by company ABC for this item A while selling the item is list price.(Defined in price list).

    SR
     
  8. robin

    robin Forum Advisor

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    So,
    Manufactured Cost is set up in costs>Item Cost
    and List Price is set up in Pricing > Price List

    When a company manufactures a product to sell,it fixes the price in Pricing > Price List.
    This is selling price for the product.
    When a customer buys this product,the money he pays is List Price.
    And Profit for company is List Price-item cost.



    Is this how it is ?
     
  9. zargon

    zargon Community Moderator Forum Guru

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    Yes, your understanding is correct.