Scenario:
The user noticed that the Estimated Gross Profit field on Sales Order line items was using an outdated item cost even after the purchase price increased significantly. Although new inventory had already been received at the higher cost, the estimated gross profit calculation continued using a lower cost value.
Solution:
The Estimated Gross Profit field on Sales Orders is calculated using:
Estimated Gross Profit = Amount - Estimated Extended Cost
Where:
- Amount = Rate × Quantity
- Estimated Extended Cost = Quantity × Estimated Item Cost
For inventory items, the estimated cost is typically based on the item’s current Average Cost rather than the most recent purchase price.
In this scenario:
- Older inventory receipts at lower costs are still included in the Average Cost calculation
- NetSuite uses a weighted average costing method
- Newly received inventory at higher prices does not immediately replace the historical average cost
As a result, the Estimated Gross Profit calculation may continue using a lower cost value until enough higher-cost inventory is received and older lower-cost inventory is depleted.
To verify the current Average Cost:
- Navigate to:
Lists > Accounting > Items - Open the item record.
- Review the Average Cost field under the Inventory subtab.
Options to update or influence the estimated cost:
- Continue receiving inventory at the new higher cost until Average Cost naturally increases
- Reduce or sell older lower-cost inventory
- Perform Inventory Adjustments to reset inventory valuation layers (requires accounting review)
- Consider Standard Costing if consistent fixed costing is preferred
- For Non-Inventory Items, update the Purchase Price field directly
Important Notes:
- Estimated Gross Profit calculations are designed to use the most accurate inventory cost basis available
- NetSuite does not automatically use the latest vendor purchase price for inventory items when Average Costing is enabled
