Landed cost corresponds to the cost incurred to products for reasons different than their purchase price. In particular, it can be the result of processes such as shipping, freight, customs, handling by third parties, etc.
In Megaventory, landed cost is implemented by means of creating one or more dedicated Shipping and Handling Bill documents specifically designed for this purpose.
Setting up such a Shipping and Handling Bill document type is a one-off process but multiple document types can be created each corresponding to a different such cost category. As an example, you can have a different Shipping and Handling Bill document for freight, another for customs, a third for a courier like FedEx, etc.
Once a Purchase Order has been invoiced or a stand-alone Purchase Invoice has been created, it is possible to issue one or more Shipping and Handling Bill documents about these invoicing documents.
Clicking to add such a document will initiate the typical document creation process:
- The Supplier in this Document does not need to be the same as the Supplier corresponding to the initial invoice. For example, a purchase of a Product by a Supplier A in China can also incur a customs Bill by Supplier B ie the Customs Agency of the receiving country.
- Only Products of Product Type Services can be added to these documents.
- A different currency than the one used in the initial invoicing can also be selected.
Approving this document will prompt the input of the Invoice documents these costs will be applied to. In particular, it is the products of these documents that will have their cost affected by the Shipping and Handling Bill document being created.
The Products of multiple Invoices can be affected by a single Shipping and Handling Bill document. Which Invoices will be affected is determined by the menu shown in the Approve prompt above.
Alternatively, a Shipping and Handling Bill document can be initiated by creating a Purchase - Receipt document:
In this case, the Shipping and Handling Bill is created independently of a specific Purchase Order or Invoice so ALL the eligible invoicing documents are available for selection:
The Shipping and Handling Bill documents affecting Invoices and/or Orders will appear in the Related Documents section of both the Invoices and the Orders.
In addition to this, the cost of the Products in question will be adjusted as can be seen in the Unit Cost Tracking report:
- The additional cost calculation due to the shipping is associated with the respective Invoice entry in this report - not a new Shipping and Handling Bill entry.
- The cost calculation will be applied at the date of receipt of the goods - not the date of issuing of the Shipping and Handling Bill document.
The new Product cost is calculated by distributing the Shipping and Handling Bill cost to the corresponding Products based on their total value.
For example, let's assume one or more Purchase Invoices with the following total Product quantities across them:
- 20 units of Product A each costing USD 20 (i.e. total value of Product A = USD 400) and
- 10 units of Product B each costing USD 10, (i.e. total value of Product B = USD 100)
Then, a Shipping and Handling Bill of total value USD 1000 would have that amount split 4:1 to Products A and B.
As a result, the 20 units of Product A would have their cost increase by USD 800 in total - or USD 40 each.
Assuming no other units of Product A exist in stock, then the new unit cost of Product A will be calculated as follows then:
USD 20 (due to the Purchase Invoice) + USD 40 (due to the Shipping and Handling) = USD 60.
Note however that in most cases the pre-existing quantity and cost of available stock will affect the outcome of the cost calculation due to the Shipping and Handling Bills. For more information about the weighted average cost calculation employed, see the Product Costing article.
Also note that additional methods of distributing the Shipping and Handling Bill cost can be implemented such as by Quantity, Weight, Volume or other such parameter of the affected Products. Drop us a line if you have a specific request!