Cost Price - precise definition

Hello I have a question regarding the term “cost price.” When I create a counting Journal in Dynamics 365 for F&O, there is a tab called “Lines Detail” → if I open it I can see the field “cost price.” Usually I thought this represents the value of our Item which we have bought (so it corresponds to the price of the product receipt). But that is not true of course, since the cost price refers to the price of the released product (in the modul Product Information Management) under the manage cost tab. My question is what does cost price" means specifically? Is it the cost we have to pay in order to hold Item X in the inventory? It would be great if someone could help me, because I was Looking for a Definition and explanation, but I could not find something.

If the item is set up using “Standard Cost” then cost is the end-all cost of the item in inventory. If you purchase or produce the item and realize a different cost then the difference is sent to a Purchase price variance or Manufacturing variance account and the cost price is put into inventory.

If the item is weighed average or FIFO/LIFO then this is not necessarily representative of the actual cost that will be used. In the case of an inventory adjustment (up) this will be used as the cost to add inventory.

Thanks for your quick reply. :slight_smile: I was checking the set up of the released product → it is “Weighted avg. date”

But what do you mean with “it is the end of all cost of the item in the inventory”?? → Since cost price is not referred to the Price of the product receipt, what is it then? I mean the purchase price reflects the value of the Item. But cost price means something else. . .

In standard cost all inventory transactions for an item are the same price.

For example:

Set item A with a cost price of $1.00

Create a PO for the item @ $1.05 / EA


-$1.05 will be added to vendor balance

$1.00 will be added to inventory [Inventory transaction]

$0.05 will be sent to PPV (Expense account) [difference]

The purchase price is a suggestion. Standard cost implies that you specify a fixed value for the item independent of what you paid for it on any given transaction. By rule, each cost roll (typically done at the end of the year) will use the latest purchase price for the next years cost

Sorry, but this is not about standard cost evaluated items, Richard.

Generally speaking cost is about how much you deduct from inventory value when you sell/consume from inventory.

All cost evaluation methods, Weighted avg date in your case is about how you evaluate the cost of sold/consumed inventory, as the existing inventory may come from multiple purchases, with different prices,

Weighted avg date means you calculate it on a daily base - the day start inventory value plus any new purchased inventory divided by the day start qty plus new purchased quantity

FIFO is another method and means you assume the inventory is consumed in the same order it enter in stock.


To answer your original question, “it depends”. Indeed some people add these costs into the inventory value, miscellaneous costs in the terms of the software, but others do not. It depends what you mean but in many businesses using the system the receipt proces of the product is the cost price. Therefore the question is slightly flipped, what does the business you are dealing with consider the cost (does it include indirects, or handling etc.) then you have the ability to configure it and the receipt price will not be the cost price. As Rares says the cost price on the inventory adjustment, is the inventory cost, the cost for margin reporting, your base cost price for the product. What that actually means will depend upon the financial requirements and configuration of the system.