Landed Cost

Landed Cost

Landed cost is total cost of receiving a stock product into inventory which includes, product cost, freight, and surcharges.  The landed cost of a product is used in calculating your average cost. 

For example, if two products were ordered and $60 in freight was charged to ship the product...

 

The $60 would be allocated proportionally to each line subtotal of the order subtotal.   
  1. Line 1 - $100 / $600 = 16.67%
    $60 x 16.67% = $10 freight for the line
    $10 / qty of 10 = $1 add to the cost of each product
  2. Line 2 - $500 / $600 = 83.33%
    $60 x 83.33% = $50 freight for the line
    $50 / qty of 10 = $5 add to the cost of each product