About Landed Costs
Unlocking the Power of Landed Cost Tracking with Finale Inventory
Efficiently Manage Landed Costs with Finale Inventory
Gain precise insights into calculating landed costs for your products using Finale Inventory. Recognizing the landed cost of a product is vital for retailers aiming to comprehend their gross margin and ensure accurate profit analysis, particularly when sourcing products internationally. Landed costs often remain overlooked until later stages of reporting. By grasping these costs, you can ensure proper pricing for profitability, factoring in desired margins.
In addition to the direct cost price paid to suppliers, there are other essential direct costs to consider in your profit calculations. Import duties, freight, and insurance exemplify these direct costs, essential to accurate gross margin computation. However, they are not as straightforward as the supplier’s cost price, as they often apply to containers rather than individual items.
A pivotal decision lies in distributing container-wide costs across its contained units. Subsequently, you need to calculate and maintain the true landed cost per unit.
With Finale Inventory, allocating additional direct costs is streamlined through four methods:
- Based on order item quantity
- Dependent on order item weight
- Relative to order item subtotal
- Considering order item cubic meters (CBM)
A profound understanding of gross margin aids in determining your break-even point and subsequent profitability. Precise landed cost figures furnish accurate reporting, fostering data reliability for pivotal business decisions. Landed costs empower you to incorporate supplementary expenses into product costs, offering a more accurate margin perspective. This, in turn, assists your sales team in setting competitive customer prices.
By harnessing the landed cost calculation, Finale’s inventory accounting capabilities and comprehensive reports create a holistic financial picture. These records ensure precise figures for financial reports, taxes, and regulatory compliance. Finale’s accounting reports eliminate guesswork, rendering information easily comprehensible for your accountant or CPA.
Visualizing Finale Inventory’s Landed Costs
Experience the demonstration of calculating landed costs using Finale Inventory in this informative video:
Illustrating Landed Cost Calculation
Imagine running a U.S.-based clothing company and ordering 500 pairs of jeans from a Chinese supplier. Each pair costs $20, amounting to a $10,000 total. With two percent duty, $800 freight, and $500 insurance, coupled with a 10 percent import tax on the goods’ value, how do you calculate landed costs?
Prior to cost calculation, convert all currencies to your local currency, the U.S. dollar (USD), considering exchange rates. Sum up the costs:
- Total product costs: 500 units × $20 = $10,000
- Freight: $800
- Customs: $10,000 × 2% = $200
- Insurance: $500
- Tax: $10,000 × 10% = $1,000
Calculating these, the total landed cost equals $12,500.
To find the landed cost per unit (one pair of jeans), divide $12,500 by 500 units, resulting in a $25 landed cost per unit. This is 25% higher than the initial $20 product cost per pair of jeans.