The Landed Cost Calculator helps businesses determine the true total cost of purchasing a product, including procurement, shipping, duties, insurance, and all associated fees. Use it to gain precise margin insights and optimize your supply chain.
Landed Cost Calculation
Leave the field you want to solve for blank. If you leave Landed Cost blank, the tool will calculate the total cost.
Final Landed Cost
Landed Cost Calculation Formula
Variables Explained
- PC (Product Cost): The wholesale or manufacturing cost of the goods.
- SC (Shipping/Freight Cost): Costs associated with moving the goods, including transportation, port fees, and carrier charges.
- DT (Duties & Taxes): Import duties, tariffs, VAT, or other government taxes applied at customs.
- I (Insurance Cost): The cost to insure the goods against damage or loss during transit.
- OF (Other Fees): Miscellaneous costs like handling, storage, inspection, currency conversion, and documentation fees.
- LC (Landed Cost): The final calculated cost, representing the true expense to bring a product to the buyer’s door.
Related Financial Calculators
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- Import Duty & Tax Estimator
- Economic Order Quantity (EOQ) Calculator
- Break-Even Analysis Tool
What is Landed Cost?
Landed Cost (LC) is the total cost of a product once it has arrived at the buyer’s dock. It includes the original cost of the product, all transportation fees (freight, shipping, etc.), customs duties, taxes, insurance, and any other incidental charges that accumulate along the supply chain. Understanding the landed cost is crucial for setting profitable pricing strategies and accurately assessing the financial viability of international sourcing or complex logistics.
Many businesses mistakenly use only the product cost and basic shipping fees when evaluating profitability. However, neglecting components like tariffs or currency exchange fees can lead to significant profit margin erosion. Calculating the full landed cost provides an accurate, all-in figure, enabling better inventory valuation and financial planning.
How to Calculate Landed Cost (Example)
Follow these steps to calculate the Landed Cost for an international shipment:
- Determine Product Cost: Obtain the cost of the goods themselves. (Example: $5,000)
- Calculate Shipping Fees: Sum all freight charges from the seller to your location. (Example: $850)
- Identify Duties and Taxes: Find the applicable tariffs and import taxes based on the product’s classification (HS code). (Example: $400)
- Add Insurance: Include the cost of insuring the shipment. (Example: $50)
- Sum Other Fees: Account for any brokerage, handling, or storage charges. (Example: $100)
- Sum the Components: Add all five components together to find the Landed Cost. ($5,000 + $850 + $400 + $50 + $100 = $6,400)
Frequently Asked Questions (FAQ)
What is the difference between FOB and Landed Cost?
FOB (Free On Board) only covers the cost of the goods and the expense of delivering them to the loading port. Landed Cost covers everything from the factory floor to the final destination, including ocean freight, customs, and last-mile delivery.
Why are duties and taxes so difficult to estimate?
Duties and taxes depend on the product’s Harmonized System (HS) code, the country of origin, and the country of destination. Misclassifying a product or misunderstanding trade agreements can lead to unexpected charges or delays.
Should I include labor and warehousing costs in Landed Cost?
Generally, Landed Cost focuses on external procurement and transit costs. Internal costs like warehouse labor (once the goods arrive) or sales commissions are usually accounted for in your Cost of Goods Sold (COGS) or Operating Expenses, but some advanced models integrate them for a “Total Delivered Cost.”
What is the most common mistake in calculating Landed Cost?
The most common mistake is failing to include all ‘Other Fees,’ especially currency conversion fees, quality inspection costs, and port congestion surcharges, which can significantly inflate the final expense.