Difference between revisions of "Landed Costs"
From TrueERP wiki
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[[Back Orders]] | [[Back Orders]] | ||
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[[Supplier]] | [[Supplier]] | ||
[[Supplier List]] | [[Supplier List]] | ||
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| − | + | == Overview == | |
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| − | *Select Utilities | + | It is possible to associate landed costs for an imported product with the original Purchase Order even though the Purchase Order has often been paid and closed before the landed costs are fully known. How to Use Landed Costs To use Landed Costs you must turn on Foreign Currency in Purchases and activate at least 1 Foreign Exchange Rate |
| − | *Select Preferences | + | |
| − | *Select Purchases | + | *Select Utilities |
| − | *Select Use Foreign Currency under Purchase Order Lines | + | *Select Preferences |
| + | *Select Purchases | ||
| + | *Select Use Foreign Currency under Purchase Order Lines | ||
*Save | *Save | ||
| − | *Select General | + | *Select General |
| − | *Select Foreign Exchange List | + | *Select Foreign Exchange List |
| − | *Select Inactive Currencies | + | *Select Inactive Currencies |
| − | *Select the currency you want to activate | + | *Select the currency you want to activate |
| − | *Enter current Buy and Sell rates and select active | + | *Enter current Buy and Sell rates and select active |
*Save | *Save | ||
| − | *Select Purchases | + | *Select Purchases |
| − | *Select Supplier List | + | *Select Supplier List |
| − | *Select the supplier you will purchase imports from | + | *Select the supplier you will purchase imports from |
| − | *Select General Tab | + | *Select General Tab |
*Select the Foreign Currency for this supplier from the drop down list | *Select the Foreign Currency for this supplier from the drop down list | ||
*Save | *Save | ||
| − | '''How to Process Landed Costs''' | + | '''How to Process Landed Costs''' Before recording Landed Costs you must have previously created a [[Purchase Order]] |
| − | Before recording Landed Costs you must have previously created a [[Purchase Order]] | + | |
| − | *Select Purchases | + | *Select Purchases |
| − | *Select Bill | + | *Select Bill |
| − | *Enter Supplier Details (usually a Customs Agent or similar) | + | *Enter Supplier Details (usually a Customs Agent or similar) |
| − | *Select the account to post Landed Costs to | + | *Select the account to post Landed Costs to |
| − | *Enter the amount | + | *Enter the amount |
| − | *In the Related PO column, select the Purchse Order number that the landed costs relate to | + | *In the Related PO column, select the Purchse Order number that the landed costs relate to |
*Save | *Save | ||
| − | *Select Purchases | + | *Select Purchases |
| − | *Select Purchase Order List | + | *Select Purchase Order List |
| − | *Select the Purchase order | + | *Select the Purchase order |
| − | *Select the Import Costs button on the right of the screen | + | *Select the Import Costs button on the right of the screen |
| − | *The landed costs will now appear in the landed costs column of the purchase order | + | *The landed costs will now appear in the landed costs column of the purchase order |
*Save | *Save | ||
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| + | <br> | ||
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| + | '''Understanding Landed Costs and Average Costs'''<br> | ||
| + | |||
| + | There is widely held misbelief that the average costs of a product, should include the cost of shipping, delievery etc or the cost to land the product on your shelf.<br> | ||
| + | |||
| + | 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.<br> | ||
| + | |||
| + | 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 markup of the landed cost.<br> | ||
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| + | While many may have theroys on how this should work the reality of it is as follows.<br> | ||
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| + | '''Landed Costs Expenses''' | ||
| + | <br>Expense | ||
| + | <br> Delivery $1,000 | ||
| + | <br>Product | ||
| + | <br> Widget $ 300 | ||
| + | <br>This makes the | ||
| + | <br> Average Cost $ 300 | ||
| + | <br> Landed Cost $1,300 | ||
| + | |||
| + | When you sell the Product | ||
| + | <br> | ||
| + | <br>Income | ||
| + | <br> Widget Sale $2,000 | ||
| + | <br> COGS $ 300 | ||
| + | |||
| + | <br> | ||
| + | |||
| + | Landed Costs as Stand Alone | ||
| + | |||
| + | Income<br> Widget Sale $2,000<br> $2,000<br>Expense<br> Delivery $1,000<br> COGS $ 300<br> $1,300 | ||
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| + | Nett $ 700 | ||
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| + | Landed Costs in Average Costs | ||
| + | |||
| + | Income<br> Widget Sale $2,000<br> $2,000<br>Expense<br> Delivery $1,000<br> COGS $1,300<br> $2,300 | ||
| + | |||
| + | Nett -$ 300<br> | ||
Revision as of 11:41, 20 April 2011
Overview
It is possible to associate landed costs for an imported product with the original Purchase Order even though the Purchase Order has often been paid and closed before the landed costs are fully known. How to Use Landed Costs To use Landed Costs you must turn on Foreign Currency in Purchases and activate at least 1 Foreign Exchange Rate
- Select Utilities
- Select Preferences
- Select Purchases
- Select Use Foreign Currency under Purchase Order Lines
- Save
- Select General
- Select Foreign Exchange List
- Select Inactive Currencies
- Select the currency you want to activate
- Enter current Buy and Sell rates and select active
- Save
- Select Purchases
- Select Supplier List
- Select the supplier you will purchase imports from
- Select General Tab
- Select the Foreign Currency for this supplier from the drop down list
- Save
How to Process Landed Costs Before recording Landed Costs you must have previously created a Purchase Order
- Select Purchases
- Select Bill
- Enter Supplier Details (usually a Customs Agent or similar)
- Select the account to post Landed Costs to
- Enter the amount
- In the Related PO column, select the Purchse Order number that the landed costs relate to
- Save
- Select Purchases
- Select Purchase Order List
- Select the Purchase order
- Select the Import Costs button on the right of the screen
- The landed costs will now appear in the landed costs column of the purchase order
- Save
Understanding Landed Costs and Average Costs
There is widely held misbelief that the average costs of a product, should include the cost of shipping, delievery 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 markup of the landed cost.
While many may have theroys on how this should work the reality of it is as follows.
Landed Costs Expenses
Expense
Delivery $1,000
Product
Widget $ 300
This makes the
Average Cost $ 300
Landed Cost $1,300
When you sell the Product
Income
Widget Sale $2,000
COGS $ 300
Landed Costs as Stand Alone
Income
Widget Sale $2,000
$2,000
Expense
Delivery $1,000
COGS $ 300
$1,300
Nett $ 700
Landed Costs in Average Costs
Income
Widget Sale $2,000
$2,000
Expense
Delivery $1,000
COGS $1,300
$2,300
Nett -$ 300
