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Variable Cost
Variable Cost % Definition:
A variable cost item is an inventory item which has the Variable Costing option selected. This item is then known as a Variable Cost % Item.
The Variable Cost % field turns on when the above option is selected.
In the Variable Cost % field, the numeric value of the cost percentage is stated.
Variable Cost can be password protected in System | User Security or Users can be given Access Privileges.
For example, when a retail price is $1.00, the posted cost of the item will be $.40, if the VC% is set to 40.
Note: If the Change Price (F4) option is selected and the price is changed, the originally calculated cost of the Variable Cost % Item will NOT change. Additionally, customer contract prices and customer price discounts will not affect the original calculated cost of the Variable Cost % Item.
Tip: The primary reasoning for this methodology is for departmental items such as loose bolts and nuts. These types of items are usually grouped together and not inventoried individually, have a zero price, and have an unreliable average cost. By using the Variable Cost approach on screws, for example, a $.05 item will have the same gross margin as a $2.00 item, giving a better representation of your actual gross margin for these items.
