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Note

Supplier freight is always allocated to the stock cost. Supplier freight is not known until the supplier invoice is entered and includes freight. The average cost is updated by averaging the freight based on line item value. The average cost update is limited to the value that would have resulted if all the stock is still in the system - if there is less stock remaining than was received then not all the freight will be allocated and some will remain in the "Carriage In" control account

If you do not want the freight allocated or you want to allocate it using a different method then enter it as a separate invoice.

Landed Cost for Drop Ship Purchase Orders

A drop ship purchase order is going direct to the customer and never passes through your warehouse.  However it is important to know the cost to you of the goods.

To create a drop ship purchase order - create a sales order and right click on any order lines that will be drop shipped.  Then on the created purchase order create a landed cost estimate.

  1. Landed Cost Estimate form, Results tab:
    1. If linked PO is a drop ship PO generated from a sales order:
      1. Show sales order code as a link to open the sales order.
      2. If sales order customer uses foreign currency:
        1. Show the currency code and the exchange rate from the SO.
        2. Add 2 columns showing 'Landed cost (ea)' and 'Total landed cost' converted to the SO customer's currency using the SO FX rate.
  2. On a sales order line with SupplierShip YES, if the generated PO has a Landed Cost Estimate then add a context menu option to open the Landed Cost.
    1. If the landed cost has charges then 'Calculate and show apportions' and switch to the Results tab.

The landed cost for a drop ship purchase order can be updated from estimate to actuals but is never "Used" by the system to update average cost. 

There are two stages in Complex Landed Costs

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Note

Expected charges may be entered as estimates and later (even after stock receipt) linked to the actuals and stock value recalculated if required.

FX amounts can be used - they are converted to the base currency for the calculation


  1. Enter Type of charge
    1. Charges are setup at Administration > configuration > Lookups > "ChargeType"
  2. enter Method of apportioning the charge
    1. By weight will look at the weight of each item and allocate by weight and is useful for shipping or air freight that is charged by weight
    2. By Dollar value uses the dollar value on the purchase order
    3. By volume uses the article volume
    4. Manual enables you to manually allocate the charges across all related lines
  3. Description - add a note to so you can remember what this charge was intended to cover

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  • The Invoices listed are all invoices that are listed in GL Accounts with "Landed Cost" special type set

 


Note

Add additional cost lines if required

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Note

If the stock level at the time of applying the actuals is below the quantity of stock on the PO line

  1. The stock Average cost will be set to the Average cost for the PO Line Actuals
  2. The remainder will be journaled to the GL Control Accounts Account "Landed Cost Expense" account
    1. This is to avoid stock average costs being artificially inflated due to insufficient stock at time of entering actuals - see example below

To illustrate

  1. A product was out of stock
  2. Say 100 units of a product was purchased for $100 with $100 total landed costs
    1. The Estimated Landed Cost is $2.00 ea
    2. When the PO is received - the average cost is set to $2
    3. Stock value has increased by $200 = 100 items x $2
  3. Then 50 are sold and shipped to customers - leaving 50 in stock
  4. When the Actuals are linked to Invoices it is found that Landed costs were $150 in total ($1.50 each)
    1. The Actual Landed Cost is $2.50 ea
    2. Stock value increase should have been $250
  5. When the Landed Cost is finalised - the average cost is set to $2.50 (an increase of $0.50)
    1. Stock value increases by $25 = $0.50 x 50 items
    2. $25 is not allocated to stock value (if it was then the average cost would have to be increased to $3.00 each item)
      1. $25 is allocated to the "Landed Cost Expense Account"

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Landed costing diagram of the flow.

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Journals for receipt of Stock item with locked estimateDebitCreditEstimate of $20 costs
Stock on Hand - assets120 
Increase in stock value
Trade Creditors Liabilities 
100Amount paid to stock supplier
Landed cost clearing account - liabilities 
20Total allocated other costs for these items based on the estimate
Totals120120     




Stock Supplier InvoiceDrCrPayment to supplier for stock
Trade Creditors - Liabilities 
100 
Goods Received not Invoiced100  

Total100100     




CR Invoice Journal for a cost paid (customs) = must be linked to landed cost clearing accountDrCrPayment of $25 costs
Trade Creditors - Liabilities 
25 
Landed cost clearing account25  

Totals2525     




Once a journal line is linked to a landed cost account   
    
    
    















Adjustment journal required once actuals are associatedDrCrAdjustment of stock from $20 estimate to $25 Actual
Landed Cost Expenses To Stock - Expense Account 
25Expense account tracking landed costs in separate account
Landed cost clearing account - liabilities20 
Clear the clearing account of the estimate value
Stock on Hand - Assets - Credit5 
Update the stock on hand with the increase (Decrease) in value required
Totals2525

Result = Stock increases $5 (now $25 more than paid to stock supplier)

and Landed Cost Clearing account = 0

Landed cost expense account = Actual = $25

 

   




Adjustment Journal if Actuals are used prior to stock receiptDrCrWhen $25 actuals are known prior to receipt of stock
Stock on Hand - assets125 
Increase in stock value
Trade Creditors Liabilities 
100Amount to be paid to stock supplier
Landed cost expenses to stock - expense account 
25Expense account tracking landed costs in separate account
Totals125125

Result = Stock increases $25 more than paid to stock supplier

Landed cost expense account = Actual = $25

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