Back Order component results in negative profit %

We enter a sales order with a Production Order item. Costing method is Standard. In the Production order BOM, we take out one of the components, because we do not have it in stock. Nevertheless, we deliver and invoice the end item to the customer at unchanged Unit Cost and Unit price. In addition, we create a new sales line for the component with 100% discount and deliver it when it becomes available again.

Problem: since the component is sold as a separate item, an Item ledger entry will be created with a Sales Amount of 0, but a Cost Amount of Standard Cost (i.e. 10). Result: negative profit on the item!
Changing the Unit Cost in the Sales Line to 0 only affects the Customer Ledger Entry, not the Item Ledger Entry.

Has anyone ideas how to solve this problem?

Your business precedure here (IMO) is wrong. You should not be selling the item at zero cost, in fact you should be delivering the item late to the client, since they have already purchased it when they purchased the completed product.

The ideal solution would be to include the item as a component of the production fo rcost purposes, but to have it seperate for delivery purposes. And since this is not standard, you need to figure out a work around. Firstly what is the reason for using a Sales Invoice, is it to generate shipping documents?

If this does not happen too often, then I would look at just doing th eprocess manually, and keeping the poruction as it is. If this is a part of the business procedure, then there are a number of options that you cna look into. But I would definitely avoid any code here, because a project like this will bloat and inflate.

One possibility is this. It assumes that you know in advance who the client is, and you knwo which component will not be delivered with the initial Product.

  • Generate a Sales order to the Client.
  • Add the missing item to the invoice with NEGATIVE quantity.
  • For this line create a new Location such as Z-MFGADJ
  • Ship the Order.
  • Manufacture the Final product INCLUDING the non shipped component, and source this from location Z-MFGADJ
  • Either use the exisitng order or create a new one and ship and sell the manufactured item to the client.
  • When the Component arrives, receive it into the Z-MFGADJ location
  • Go back to the first order, and add a new POSITIVE line to the order.
  • Set the Unit Pirce on both lines as zero, and Ship and Invoice the remainder of the order.
    Now this all looks very complex, and I am pretty certain you/your client will not accpeptthis process, but what it does is gives you a starting point. THe accoutning will be correct, and then its just a case of making it work.

Well David, this doens’t look much more complex to me than our current procedure (we also tested with a Sales Return order for the remaining component in a specific location).

I will go through the suggested procedure and will keep you informed of the results. Thanks!

Good to hear, I hope it helps.

I use the ability to add negative quantity to Orders for many things. It saves a lot of code and a lot of headaches. Oftent he client then needs the porcess automated, but at least its then all standard Navision, and no problems with the next upgrade.

Hi David,

I like the procedure. However, the result in the end is the same: I will have a negative Profit % on my component! These are the ledger entries:

Entry Type Qty. Sales Am. Cost Am.

Sale 50 0 0
Sale -50 0 -14,60
Consumption -50 0 -14,60
Purchase 50 0 14,60

The negatvive line in the SO is posted with a Cost Amount of 0. Profit on this item is therefore -14,60.
Or am I overlooking something?

did you run the Adjust cost routine. I can see there is something missing, but not sure where. ALso which entry is aplied to which?

Yes, I did.

Ehhh, applied with? I did not apply anything!