Definition
Landed cost is the total cost of getting purchased goods into your warehouse: the supplier's price plus freight, insurance, customs duty, clearing and handling.
What is landed cost used for?
Valuing imported stock at the supplier’s price alone understates its true cost and overstates margin. Landed costing spreads the extra charges across the items received, usually by value, weight or quantity.
An import shipment
Example- Supplier invoice
- USD 100,000
- Freight and insurance
- USD 8,000
- Customs duty
- USD 5,000
- Clearing and handling
- USD 2,000
Landed cost
USD 115,000
Recoverable taxes, such as import VAT that a registered business can reclaim, are normally left out of landed cost. Landed cost feeds inventory valuation and, through it, your margins.