What is Landed Cost?
Landed cost is the full cost of getting goods into your shop: the purchase price plus freight, loading, duties, taxes that cannot be claimed back, and other charges, less any discount.
Updated
Meaning
English
Landed cost is the full cost of getting goods into your shop: the purchase price plus freight, loading, duties, taxes that cannot be claimed back, and other charges, less any discount.
Roman Urdu
Landed cost maal ko dukaan tak laane ki poori qeemat hai: khareed ki qeemat jama kiraya, loading, duty aur doosre kharchay, minus discount.
Also called total cost, cost including freight, asal laagat.
Example
A shop buys 100 pieces at 300 rupees each from a Karachi supplier. Freight to Multan is 2,000 rupees and loading 500. Landed cost is 32,500 for 100, so 325 rupees a piece, not 300.
How it works
If freight and other charges are not added to cost, every margin calculation is wrong, and the shop may price items below what they really cost. This matters most for goods bought from other cities, imports and heavy or bulky items such as cement, tiles and furniture, where transport is a large share of the price.
Spread the charges across the lines of the purchase, usually by value or by quantity, and use the landed cost as the item's cost price. Supplier discounts work the other way: they reduce landed cost.
In Nafaa
When a purchase is entered in Nafaa, freight, tax and discount on the bill are spread across its lines, so each unit's cost is its landed cost. Batches are created at that cost, and purchase returns lower the supplier's balance by the same landed cost.
Related terms
- COGS (Cost of Goods Sold)
Cost of goods sold is the purchase cost of the items a business actually sold in a period, which is subtracted from sales to find gross profit.
- Markup
Markup is the amount added to the cost price to get the selling price, usually expressed as a percentage of cost.
- Purchase Order (PO)
A purchase order is a document a buyer sends a supplier listing the items, quantities and agreed prices it wants to buy.
- GRN (Goods Received Note)
A goods received note records what actually arrived from a supplier, checked against the purchase order, before the stock is added and the bill is paid.