Why Drop Ship Items Show 100% Gross Profit Rate on Sales Orders

If an item is drop shipped and does not have a quantity on hand across all locations the system will calculate a 100% gross profit rate if the designated Cost Estimate Type is Average.

On a sales order, the data in the Estimated Extended Cost field is dependent on the Cost Estimate Type specified in the item record. This is because the unit average cost that is derived by the Extended Cost field of the sales order is computed based from the quotient of the total on hand value divided by the total quantity on hand of an item.

When an item is drop shipped, the system does not recognize any increase in its quantity on hand because the purchased quantities are presumed to be shipped directly from the supplier to the customer.

In order to set the appropriate estimated extended cost for the drop ship items the user may complete either of the following steps:

    1. Set a default Cost Estimate Type other than Average in the item record under the Sales/Pricing tab. A more representative type would be based on the purchase order rate.
    2. In the line item level of sales orders, select a Cost Estimate Type other than Average.

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