Landed Cost Scenarios 1

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Scenario: We have one Item β€œP-0001” which we are purchasing from a vendor β€œAcme Office Supplies”, The item purchase price is β€œ2000$” and Quantity = 1

Now this product is transported by a shipping(freight) vendor β€œVendor A” - during transportation, the Item has been charged different costs:

  • Freight fee

  • Insurance fee

  • Fuel fee

  • Local Transportation fee

So, now at the time of purchase order creation, we know the estimated cost for each of these:

  • Freight is 200$ / Quantity => Freight fee = 200$ x 1 = 200$

  • Insurance, 10% of Item Purchase price => Insurance fee = 10% x 2000$ = 200$

  • Fuel is 1$ / measurement => so let’s say it is 60kg, then Fuel fee = 11$ x 50Kg = 60$

  • Local Transportation is 20 % of "Freight cost" => Local Transport fee = 20% x 200$ = 40$

Therefore:

  • Total Estimated cost for Item "P-0001" = 200$ + 200$ +60$ + 40$ = 500$

  • Total Item landed cost for Item "P-0001" = 2000$ +500$ = 2500$

However, the shipper sends an actual billing as 600$ instead 500$ as before.

So, the final Landed Cost of Item must be recalculated = 2000$ + 600$ = 2600$. Then, the system should post the adjustment transaction as 100$ based on the Landed Cost Estimation.


BSD 1: Actual Freight bill received after Item is received and invoiced.

  • Item Cost at the time of Purchase order Invoice: 2000$ + 500$ = 2500$ Estimated cost

  • Adjustment due to Actual freight Invoice = 100$ USD

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