We need to update the purchase price on a PO and would like that all sales made from items on this PO should reflect the updated cost of the item. Is there a way to go about this?

What inventory costing method are you using for the items? The PO is a non-posting transaction. it's the Item Receipt that affects the inventory balance although by default the rate there is based on the PO it came from(but can still be edited).

we are using FIFO or specific. Can I update the item receipt and all sales orders will update (profit and loss report as well?)

I don't have experience using FIFO or specific but the Sales Order is also a non posting transaction. It's the Item Fulfillment that records the Cost of Goods Sold impact. I'm not sure if updating the Item Receipt will also update the Item Fulfillment you might have to try in your sandbox or test account.

Got it. how do I update the pricing on the item fulfillment?