What’s the difference between Cost Prices and Sales Prices in Microsoft Dynamics AX?

Posted on: October 21, 2015 | By: Jarrod Kraemer | Microsoft Dynamics AX/365

Microsoft Dynamics AX Project Accounting can essentially run your project based service business for you.  For your organization to successfully use Projects in Dynamics AX, it is essential to understand the difference between cost and sales prices and properly configure each for every project your company is involved in.

So what are cost prices and sales prices on a project?  Cost prices and sales prices can be set up for project hours and expenses.  These prices are applied every time an hour or expense transaction is entered, either in a journal or through timesheets or expense reports.  A cost price is the price at which the hour of work or particular expense is going to cost your business.  That is, what you are actually reimbursing your employee for – either for the expense they reported or hours they worked.  A sales price is what you are actually billing your client for each hour of labor or each expense.  Your sales price minus your cost price is going to be the revenue earned on each hour of labor or expense. 

Let’s take a look at an example.  Let’s say that for hours on Project X we have a cost price set up of $15, i.e. for each hour of work on this project we are paying our employee $15.  For hours on Project X we also have a sales price set up of $30, i.e. for each hour of work on this project we are going to charge our customer $30.  Every time an hours journal or timesheet entry is posted for Project X $15 is going to hit a cost account and $30 will hit a revenue account.  The accounts that these transactions post to are setup on the Project Management and Accounting module under Ledger posting setup. 

Cost and sales prices are setup with an effective date, and can also be set up by specific worker, project, category or a combination of all three.  The sales or cost price that meet the most criteria is what will be applied.  Say we have an hours price set up effective from 10/1/15 with no other criteria specified for $50, an hours price set up from 10/1 for project X for $65, and an hours price set up effective from 10/1/15 for project X and John Smith for $75.  These are the only prices we have set up in the system.  If John Smith works 2 hours on project X after 10/1 then $150 will be posted to project X.  If John Smith works 2 hours on project Y then $100 dollar will be posted to the project because the only condition that is met is the effective date.  If Jane Doe works 2 hours on project X then $130 will be posted to the project. 

One final important thing to note is that sales prices can be based off of cost prices (but not vice versa).  We can set the sales price to be a basic quantity, which is just like the cost price setup.  We can set the sales price model as a contribution ratio – which expressed as a percentage of the sales price, if you choose this option your sales price will be calculated as (100 * cost price) / (100 – Pricing).  We can also set the sales price model as a charges percentage  – which adds whatever percent you choose to the cost price, if you choose this option your sales price will be calculated as (Cost price * (100 + pricing) / 100).  Or lastly, we can set the sales price model as charges amount – which will just add whatever fixed quantity you specify to the cost price, if you chose this option your sales price will be calculated as (Cost Price + Pricing).

We hope this blog has helped you to understand why sales and cost prices are so important in setting up a project in AX.  You should now be able to set up cost and sales prices in your system to meet your needs.  If you have any further questions do not hesitate to reach out to us at info@loganconsulting.com or (312) 345-8817, we have several resources that can provide additional information on this topic or any other project management and Accounting topic that you may have questions about.  



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