Overview: Landed Costs

Shipments received from certain locations may incur landed costs, such as import duties and broker, trailer, freight, and storage fees. Landed costs are in addition to the item's purchase order cost. You can track these landed costs and include them in the cost of purchased items. The system can include landed costs in the item's actual and average costs.

This topic has these subtopics:

Landed Cost Methods
Landed Cost Setup
Standard Cost Method
Actual Cost Method

Landed Cost Methods

There are two methods of tracking and updating landed costs: standard and actual. You need to decide which method is most appropriate for each item and vendor. However, you can use the standard cost method when you purchase an item from one vendor and the actual method when you purchase the same item from a different vendor. If using actual landed costs, you also have the option to accrue the estimated percentage for these costs at the time of receipt.

Landed Cost Setup

Before you use landed cost, set these options:

  • Select the AP interfaced to purchasing? option in the System Options Maintenance (XM) program (Accounts Payable Options).

  • Enter names for the Landed cost type 1 - 4 options in the System Options Maintenance (XM) program (Accounts Payable Options).

  • Set up landed cost codes in Landed Cost Codes Maintenance (TMM).

  • Review the Accrue landed costs? option in the System Options Maintenance (XM) program (Accounts Payable Options) that controls if you want to accrue the landed costs at the time of receipt. If you select this option, you will need to set up Landed Cost Accrual (LCST ACCR) and Landed Cost Variance accounts (LCST VAR) in Posting Criteria Maintenance

Standard Cost Method

If you use the standard cost method to track landed costs, the system includes standard landed costs in an item's cost when the invoice is updated in accounts payable. You must set up landed cost codes and establish a cost percent for each in the Landed Cost Codes Maintenance (TMM). For items from specific vendors that are subject to landed costs, select a landed cost code for each landed cost field in Vendor Price Maintenance (VMM).

The system uses the Cost % field for the landed cost code in Landed Cost Codes Maintenance to calculate the actual cost. When you use the AP Invoice Entry (NE) program to enter the invoice for the goods received, the system adds this fixed percentage to the invoiced cost, affecting the item's actual cost:

Current actual cost = Invoiced unit cost + (Invoiced unit cost x Landed cost percent)

For example, if the invoiced cost is 7.00 and landed cost is 2%, current actual is 7.14:  7.00 + (7.00 x .02) = 7.14

Actual Cost Method

If you use the actual cost method to track landed costs, the system adds the actual landed costs to the item's actual cost when all invoices for a receipt have been entered in AP Invoice Entry (NE) and you have run Landed Cost Update (NLCU) for the receiver.

To track actual landed costs, enter the landed cost codes that apply to the item and vendor in the Vendor Price Maintenance (VMM) program and select Use actual landed costs.

When the goods are received, the receiving programs update the item’s actual cost (viewed in ICM/ICQ):

Actual cost = PO cost

Average cost = [(Quantity on hand x Current average cost) + (PO unit cost x Quantity received] / (Quantity on hand + Quantity received)

If you have opted to accrue the landed costs at the time of receipt, the PO Receipt Register (VRJ) will also calculate and post the percentages set up in Landed Cost Codes Maintenance (TMM) for each code that applies to this vendor/item to landed cost accrual account(s) set in Posting Criteria Maintenance (XPC).

When the invoice from the vendor who supplied the goods is received, it is entered in AP Invoice Entry (NE) and tied to the receiver/PO line on which the goods were received. The invoice is entered like a normal material or labor invoice for a purchase order.

When the invoices for the landed costs are received from the appropriate vendors/handlers, they are entered in AP Invoice Entry (NE) and the operator selects the type of invoice as L (Landed cost) and enters the landed cost type that applies to this invoice (e.g., landed cost code FR for freight). The program displays open receivers where this landed cost is applicable and prompts for selection of the receiver to which this invoice applies.

If you opted to accrue landed costs when the receiving register was posted, the AP Invoice Register will post an offsetting entry for the amounts that were accrued, and post the difference between the accrued amount and the actual amount to the landed cost variance account(s).

Note
The system accumulates and stores landed costs in your base currency. You can enter invoices from a vendor in that vendor's currency; however, you must convert landed costs to your base currency.

When you have received all applicable invoices for a purchase, run the Landed Cost Update program to have the system update the item’s cost.

Current actual cost = Invoiced cost + (Total actual landed cost / Quantity received)

Average cost = [((Quantity on hand - Quantity received) x Current average cost) + (Quantity received x Current actual cost)] / Quantity on hand