Landed cost

The full cost to bring goods onto your shelf or into your warehouse — purchase price plus freight, duty, insurance, and other inbound charges allocated to the item.

Also searched as: true cost of goods, import cost allocation, freight into inventory, duty into stock

Unit price on the vendor invoice is rarely what the item really cost. Ocean freight, inland haulage, customs duty, and insurance often land after the goods. If those stay in expense accounts, your inventory is understated and gross margin looks better than it is.

Landed cost means those charges are allocated into inventory value (and later into COGS when you sell). The hard part is timing: charges may arrive on a different vendor bill weeks later, so the system must let you attach them to the receipt or purchase without rewriting history casually.

You only need formal landed-cost routines when inbound charges are material relative to the goods. A local cash-and-carry business with negligible freight can keep freight in expense and stay sane.

Allocate freight and duty onto 100 units

Vendor invoice $1,000 for 100 units. Later bills: freight $80, duty $120. All belong to that receipt.

1. Merchandise = $1,000.
2. Inbound charges = $80 + $120 = $200.
3. Landed total = $1,000 + $200 = $1,200.
4. Landed unit cost = $1,200 ÷ 100 = $12.00.

Inventory is valued at $12.00 per unit, not $10.00. Selling later at $18 shows $6 margin, not $8.

Related modules

• Inventory & assets
• Receivables & payables
• Finance & ledger

Related terms

• Cost of goods sold (COGS)
• Three-way match
• Perpetual inventory
• SKU

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