Item Cost shows cost of an item, is used on PO's, and is used to calculate replacement.
When you create a new Purchase Order (PO) and add an item its Item Cost is filled in. If you sell into negative quantities, Item Cost is used to estimate the replacement cost.
When you change Cost on PO, BigBusiness will ask if you want to change Item Cost. Yes, only if this is new cost for your primary vendor. No, if it is just a one-time cost.