Landed cost: add transport and delivery

The price on a delivery note is the money paid for the goods themselves. But before they reach your shelf a good deal more is spent: freight, customs and broker services, bank fees, unloading. If you do not add these to the item price, profit in the table looks much larger than it is, and you notice only at month end when the till is short. This mistake is especially common among those who bring goods from afar, from a wholesale market or from another region. Below, one batch shows how to calculate landed cost correctly.

The price on paper and the real price

Say you imported 400 thermos flasks from China. The delivery note shows 38,000 so'm each, 15,200,000 so'm in total. Extra costs:

• freight: 1,800,000 so'm;
• customs charges and broker services: 1,500,000 so'm;
• unloading at the warehouse: 200,000 so'm;
• bank commission and currency conversion: 300,000 so'm.

Extra costs total 3,800,000 so'm. The full amount: 15,200,000 + 3,800,000 = 19,000,000 so'm. The real cost of one flask is 19,000,000 ÷ 400 = 47,500 so'm, not the 38,000 on the delivery note. The gap is 25 percent.

You sell a flask for 52,000 so'm. By the delivery note the profit is 52,000 − 38,000 = 14,000 so'm, roughly 27 percent of the price. The real profit is 52,000 − 47,500 = 4,500 so'm, about 9 percent. The table was showing three times the real profit. This is where it is decided whether profit covers rent, wages and taxes.

What goes into landed cost

The rule is simple: every so'm spent on this particular item from the moment of purchase to the moment it reaches the shelf goes into cost. Typically:

1. the item price on the delivery note;
2. freight: international and local, plus insurance in transit;
3. customs charges and broker or forwarder fees;
4. loading and unloading, carrying into the warehouse;
5. bank commission and the exchange-rate difference when converting currency;
6. preparation for sale: repacking, sticking on labels.

Not included: shop rent, wages, advertising, utilities. These are overheads and are deducted from profit separately. If you mix them into cost you count them twice.

Spreading costs across a mixed batch

If a batch holds several kinds of goods, the shared costs must be split fairly between them. Freight is usually best divided by weight or volume, customs and insurance by value. For example, freight is 900,000 so'm and the batch has 150 kg of glasses and 50 kg of saucers. For 200 kg that is 900,000 ÷ 200 = 4,500 so'm per kilogram. The glasses take 150 × 4,500 = 675,000 and the saucers 50 × 4,500 = 225,000 so'm. Each item adds its share and is divided by its number of pieces.

Broken and unusable goods

Goods can break in transit. If 8 of 400 are broken, cost is divided not by 400 but by the 392 usable ones: 19,000,000 ÷ 392 ≈ 48,470 so'm. Money paid for broken goods does not vanish; it is spread over those sold. If the supplier or carrier compensates you, deduct that sum from the cost.

Entering it in the table and revisiting the price

Write the calculated cost in the purchase-price column and keep the delivery-note price in the notes. Then recalculate your margin: if a profit of 4,500 so'm is too small, it is time to think about a higher price, another supplier or a larger batch (the freight share per piece falls). When the exchange rate moves, the cost of the next batch moves too, so check prices after every batch.

Conclusion

Landed cost is not the price on a document but the full price of the goods by the time they reach your shelf. Calculate it correctly and you see real profit and set prices on solid ground. If your cost column is a mess or you do not know the exact value of your stock, the AniqHisob team can run a stock count and help put the records in order.