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,
- Generate an Item Receipt from the Purchase Order (or a Bill if not using Item Receipts) and complete as per your process.
- Click the Landed Cost tab.
- Enter the landed costs on the lines by typing the item code or description in the item code box.
Click Post and Close.
- 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.