Landed Costs

Landed Costs


The Landed Cost feature allow for the allocation of costs associated with getting products from the vendor to your warehouse to be automatically or manually to costs of goods sold amongst the products on a PO/Item Receipt. Examples of these types of costs include freight, tariffs, insurance, customs, currency conversion, crating and ocean transport.

Landed costs are entered at the time of item receipt (or bill, if item receipts aren't used). Here are some concepts and definitions to get us started :

Landed Cost - cost associated with getting product from vendor to warehouse.
Acquisition Cost - the product cost plus the landed costs.

How it works

When added to an item receipt or bill as service items along with the products, these costs are assumed paid to the vendor along with the products. In this case, nothing is allocated to cost of goods sold. Expenses like shipping get recorded to a shipping expense account. Items on the Landed Costs tab, on the other hand, are allocated to the costs of good sold. The calculation of exactly how much the cost of goods sold is increased per item can be done in one of three ways: By Quantity, by Amount or by Weight.

In the Quantity method, the landed costs are divided by the total item quantity to derive a per quantity amount and then allocated to each item based on the quantity of that item on the document. For example, let's take a scenario where we have two items and landed costs of $100. There is a quantity of 2 of item 1 and a quantity of 3 of item 2. Dividing $100 (landed costs) by 5 (total item quantity, we get a total of $20 per item quantity, so item 1 is allocated $40 and item 2 is allocated $60.

The amount method uses the total cost of the item and the weight calculates the allocation using the item weight. If nothing is specified, the system uses a default of amount.

Costs may also be calculated manually by checking the Manual allocation checkbox and entering amounts on the line. The total allocated much equal the total of the landed costs.

Using Landed Cost

To enable landed costs, check the Allow Landed Costs checkbox in Quick Menu → Settings.

Using Landed Cost

To enter landed costs on an order,
  1. Generate an Item Receipt from the Purchase Order (or a Bill if not using Item Receipts) and complete as per your process.
  2. Click the Landed Cost tab.
  3. Enter the landed costs on the lines by typing the item code or description in the item code box. 
    • If the landed cost needed is not present in the list, click the Show All link and then Create to create a new landed cost item. Choose Service as the item type and check the landed costs checkbox. Choose an allocation method. These items will only be available in the landed costs tab.
  4. Click Post and Close.

    • Related Articles

    • Item Last Costs

      Item Last Costs The item last cost is the most recent cost for that item. It is derived from the cost on the bill received for a purchase order. Inventory adjustments, item receipts and assembly builds also update item last costs. For more ...
    • Choose Item Purchase Cost (extension)

      Introduction This extension allows users to choose between item expected cost (from the Item Detail Card) and item last cost 9cost the last time the item was purchased) when creating purchase orders. The Purchase Order draft is automatically updated ...
    • About Costs

      Costs AccountingSuite uses the following terms when reporting costs for an item: Standard (or expected) cost - this is in the expected cost field on the item card. It is entered manually and is stored as entered. This number is not used in any ...
    • Average Costs

      1. What is average costs? This is the average cost the quantity of the item currently in inventory. This is used in the calculations for the Inventory Valuation Report. 2. With weighted average costing, what document is used to calculate the cogs? ...
    • Item Last Costs

      Item Last Costs The item last costs page lists all inventory items with the last price you paid for them. Clicking on the line will navigate to the Purchase Order where this last purchase was made. Navigate to Inventory → Item Last Costs.