Table of contents

Overview

Landed costing adds costs incurred in getting the stock into store to the price paid for the stock and updates the average cost in the system.

There are two stages

1. Estimated stage = costs are estimated.   The PO can be receipted and average cost of the stock will use the estimated costs
2. Actual stage = actual costs are compared with the costs used in the estimate stage and the average costs are then adjusted to suit.

Set the Purchase Order to use Landed Costing

Create a Landed Cost Estimate - one for each PO

1. Select purchase order that will require landed cost adjustment
2. Provide a name

Entering the Charges

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

View the Estimated charges by Purchase Order Line

Action Button: Calculate and show Apportions

Review calculations

Manual values need to be entered in the grid - the remainder will show until you have allocated all the expected cost

Each line will show the purchase order value, the landed costs being added and the final cost ea.  This will then be used to update the average cost

New Average cost = (current average cost * current stock qty + qty from the PO * final cost ea) / (current stock qty + PO stock Qty)

Set the Estimate Ready to Use

When you have completed the estimate then Action Button: Set Estimate Ready to use

Receiving Stock - no changes to standard process

Receive stock as normal 

1. The system will use the calculated average cost for stock value journals - see Purchase Order for Perishable Goods from PO to Goods Receipt
2. The Journals created are at the bottom of this page

Landed Cost Estimate recalculates based on actual counts before stock journals created

When the stock is counted the landed cost allocation is updated and recalculated before the Stock Journals are created

1. If less stock than was expected is counted during receipt - then the average cost of all items will increase
2. If more stock than than was expected is counted during receipt - then the average cost of all items will decrease

Later updating the estimate to Actuals

Once actual costs for shipping, customs, inspections etc have arrived it is time to enter the actuals.

From the Purchase Order for Perishable Goods from PO to Goods Receipt - open the estimate

Select an invoice to link to and select the line/s on the invoice to use - allocate the amounts to use

Action Button: Calculate Actual Average costs

Review calculations and adjust manual allocations in the grid.  Status "Calculate and Show Apportions"

Finalised Landed Costs

Where changes are to be made

• The average cost of the article will be adjusted to the new average cost
• Journals will be written including clearing out any balance in the clearing account
• The status will then move to Actual used. 

Landed costing diagram of the flow.

The typical scenario is as follows:

1. A number of products are to be imported from an overseas country from a number of suppliers
   1. Therefore there are multiple purchase orders each with multiple lines on them
2. Costs are then incurred
   1. A shipping company is engaged - and will cost money
   2. Transport is arranged in the foreign country, travelling to your country and then within your country to your dock
   3. Export and import fees and duty may apply
3. The product is then shipped
4. The product arrives in your store and is placed into stock
5. Some of this product may be used or sold
6. The final charges are presented to you

Because of the timing of the final charges being presented we need to:

1. Use estimated values in order to receipt the stock to store and arrive at an approximate cost
2. Update the cost once the actuals have been received.

Accounting Journals

GL Control Accounts for Landed Costing

So two new control accounts have been added to Maintain GL Control

1. Landed Cost clearing account 
   
   1. Filled with values when stock is receipted using estimated costs
   2. Cleared once known costs are allocated
2. Landed Cost Expense account
   1. Tracks all costs that have been added to stock as part of an actual landed cost update.

Example Charge Types Configuration

Setup in Lookups screen