View source for Landed Costs Understanding

'''Understanding Landed Costs and Average Costs'''

There is a widely held mis-belief that the average costs of a product, should include the cost of shipping, delivery etc or the cost to land the product on your shelf.

This is not the case and should not be considered, without a very strong understanding of how this works and a strong understanding of the additional work required to maintain this belief.

The Landed Cost value is designed purely for the purpose of calculating what your sell price should be based on either a margin or a mark-up of the landed cost.

While many may have theory on how this should work the reality of it is as follows.



'''Landed Costs Expenses'''

Expense&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp; &nbsp; &nbsp; Delivery $1,000

Product&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp; &nbsp; &nbsp;&nbsp; Widget $&nbsp; 300

This makes the

Average Cost&nbsp;&nbsp;&nbsp;&nbsp; $ 300<br>Landed Cost&nbsp;&nbsp;&nbsp;&nbsp; $1,300



When you sell the Product<br>Income&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Widget Sale $2,000<br> 



'''Landed Costs as Stand Alone'''

Income &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; Widget Sale &nbsp;<u>$2,000</u>

Expense&nbsp;&nbsp;&nbsp;&nbsp; Delivery $1,000<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; COGS&nbsp;&nbsp; $ 300<br>Total Expenses&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>$1,300</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>'''Nett $ 700'''</u>

<br>

'''Landed Costs in Average Costs'''

Income&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Widget Sale <u>$2,000</u><br>Expense&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Delivery $1,000<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; COGS $1,300<br>Total Expenses &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<u>&nbsp; $2,300</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>'''Nett -$ 300'''</u><br>