Pricing Administration Guide > Creating and Using Cost Lists >

About Cost Lists

A cost list is a set of costs for products or services. You can attach a cost list to either a rate list or a price list in order to determine the profit margin.

The margin is the difference between the list or promotional price of a product or service and the cost of that product or service. The margin is stated as a percentage that is calculated as follows:

Margin = (List or Promotional Price - Cost) / List Price

For example, if a product's list price is $100 and its cost is $80, the margin is 20 percent. If a product's list price is $100 and its cost is $60, the margin is 40 percent.

There are three cost methods that can be used to determine the cost of a product or service:

• Standard Cost. A predetermined operating cost, which is compared with the actual cost in order to measure the performance of a given department or operation.
• Last Cost. A cost metric used in the LIFO (Last-In, First Out) costing method. LIFO calculates cost by assuming the last goods purchased are the first goods sold, so the ending inventory consists of the earliest goods purchased
• Next Cost. A costing method that allows the user to maintain the cost manually.
• Average Cost. A costing method that calculates product cost as the average (arithmetic mean) of all the purchase costs of an inventoried product.

You can enter all four of these costs for each product or service that is a line item in the cost list. You use the Cost List record to choose which of these cost methods is used for all the line items in the list.

The same cost list can be attached to multiple price lists. For example, you may have two price lists that list different prices for the same products, one with the prices for customers and the other with the prices for resellers. The products may have the same cost, regardless of the price you charge for them. Then you can attach the same cost list to both of these price lists.