PandoratechTrading
Landed cost: why your margin is not what you think
If freight and duty sit in overheads, every product looks more profitable than it is — and the cheap-looking supplier may be the expensive one.
Pandoratech·
What belongs in the cost of goods
Freight, insurance, customs duty, clearance fees and inland handling are all costs of getting that specific stock onto your shelf. Posting them to a general expense account is simpler at entry and wrong at reporting: the goods appear cheaper than they were, and the expense line tells you nothing about which shipment caused it.
Allocating across a mixed shipment
A container rarely holds one product. Costs have to be spread across the lines by value, weight or volume depending on what actually drove them — duty follows value, freight often follows volume. Choosing the basis per cost type is the difference between an allocation that reflects reality and one that merely balances.
The decisions it changes
Once landed cost is per line, two things usually surface: some products are barely profitable after freight, and some suppliers are more expensive delivered than their quoted price suggests. Both are pricing and purchasing decisions that were previously being made on incomplete numbers.