FAQ: Landed Cost Basics

Q: Is landed cost the same as cost of goods sold (COGS)?

A: No, but they are closely related. Landed cost is the total cost to acquire and deliver inventory to your warehouse. COGS includes landed cost plus any other expenses incurred to sell that inventory (labor, packaging, shipping to customers, etc.). When you sell an item, its landed cost becomes part of your COGS.

Q: Can I add landed costs to a document I've already received?

A: In Usystems, landed costs should be recorded and allocated at the time of receipt. If you receive goods and then later discover additional charges, you may need to create an adjustment document or consult your system administrator about the best way to capture the cost retroactively.

Q: What charges count as landed costs?

A: Landed costs include any charges incurred to bring goods into your possession and ready them for sale:

• International or domestic freight
• Customs duties and tariffs
• Import taxes and VAT
• Insurance in transit
• Port fees and handling charges
• Broker commissions
• Warehouse storage fees (if incurred during receipt)

Do not include sales commissions, advertising, or costs incurred after goods are in your warehouse.

Q: Why should I track landed costs instead of just using the invoice price?

A: Using only the invoice price ignores additional costs you have actually paid. This leads to:

• Underestimated inventory value on your balance sheet
• Inflated profit margins in reports (because COGS is understated)
• Wrong pricing decisions (you may not price products high enough to cover all costs)
• Inaccurate unit costs for financial analysis

Q: How do I know which allocation method to use (value, weight, or volume)?

A: Choose the method that best reflects how the landed cost is incurred:

• By value: Use this if the charge is related to the value of goods (e.g., customs duty based on declared value, insurance premiums). Items with higher purchase prices will bear more of the cost.
• By weight: Use this if the charge is based on weight (e.g., freight that charges per kilogram). Heavier items will bear more of the cost.
• By volume: Use this if the charge is based on physical space (e.g., container shipping that charges per cubic meter). Bulkier items will bear more of the cost.

Q: Can different items on the same purchase have different allocation methods?

A: In most cases, all landed costs on a single document use the same allocation method. If you need to use different methods for different costs, you may need to split them into separate purchase documents or consult your administrator.

Q: Does allocated landed cost appear on my printed purchase document?

A: That depends on your print template settings. By default, landed costs may be shown separately or merged into the unit price of each item. See Showing landed costs on printed documents for options.

Q: What happens to landed costs if I return part of a purchase?

A: When you return items, the allocated landed cost associated with those items is also reversed. Usystems automatically adjusts the cost record so that only the items you kept bear the proportional share of the landed costs.