How to Calculate a Landed Cost

Whether you are running a small or a large one, in business, everything should be calculated because even small things can make a big difference. Landed cost is one of the essentials of running a business. We should know how to calculate it, and we should care about it.

Landed cost is the term used for the total calculation of all expenses you made for buying the products that you’ll sell and its shipping charges from the source to you. But it’s not as simple as how it sounds. Because when we say all expenses, there are many things behind that.

What Composes a Landed Cost

To learn how to calculate the landed cost is also to obtain knowledge to what are the factors of doing so. Calculating landed cost involves:

• Agreed product price from the supplier, including packaging and branding.
• Quality assurance expenses.
• Freight cost includes packing, crating, handling and freight.
• Insurance, compliance and documentation costs.
• If shipping from overseas then it includes tariff and currency conversions.
• Overhead costs or other expenses until it reaches your warehouse or distribution center.

The key here is to gather all the data and to know everything that may involve expenses even the smallest cent.

How to Calculate Landed Cost

Formula: (Total Item Cost + Quality Assurance Fee + Freight Cost + Insurance Charges + Tariff Charge + Overhead) / Shipment Quantity = Landed Cost Per Unit

Now this is just a simple formula. It gets a bit more complicated once other factors have been added. But having an idea about it can absolutely help you with handling your own business.