Landed Cost (total landed cost, formula and reporting)
Landed cost is the full cost of getting one unit into sellable condition: the supplier's unit price plus its share of inbound freight, customs duties and tariffs, insurance, and prep or inspection fees. It's the number that belongs in COGS and inventory valuation. Most sellers who track costs at all track only the invoice price, which understates true cost by 20-40% for imported goods and quietly overstates every margin on the P&L.
Here's why the gap is so dangerous. A widget costs $6.00 from your supplier. Its share of ocean freight is $1.10, the tariff adds $0.90, and inbound prep is $0.35. Landed cost: $8.35, which is 39% above invoice. Price the product off the $6.00 and a listing you believe earns a 55% gross margin actually earns 38%. Multiply that error across a catalog and ad budget, and you're scaling SKUs that barely break even.
What "landing cost" means, and the formula
Landing cost and total landed cost are the same idea under different names. The formula: supplier unit price + inbound freight per unit + duties and tariffs per unit + insurance per unit + brokerage, port and prep fees per unit. Add them up and you have the number that belongs in inventory and, when the unit sells, in COGS. Outbound shipping to the customer isn't landed cost; it's a fulfillment expense that belongs in contribution margin instead.
The hard part is allocation. A $4,800 ocean freight bill covers a container holding 12,000 units of three SKUs at different sizes. Split it by unit count and the small SKU subsidizes the bulky one; split it by cubic volume or weight and each product carries its share. Duty allocates by customs value, since that's how it was assessed. Most sellers pick weight or volume for freight and value for duty, write the rule down, and apply it at every receiving.
Landed cost reporting
A useful landed cost report shows, per SKU and per receiving, each cost component and the resulting unit cost, next to the previous receiving's number. That comparison is the point: it's how you see freight climbing from $1.10 to $1.60 a unit before it shows up as a margin problem three months later. Reports that show one blended cost per SKU hide the trend. If your inventory tool can't produce the breakdown, a spreadsheet keyed to purchase orders does the job until volume justifies software. For sellers on NetSuite or Cin7, the landed cost module does the allocation and the reporting in one place.
Landed cost moves
Freight rates swing, tariff schedules change, and a product that penciled out in January can be underwater by June with nobody noticing, because the invoice price never changed. That's why we recalculate landed costs per receiving, not once a year. The mechanics of allocating freight and duty across a container are covered in our COGS formula guide, and it's standard in our monthly bookkeeping.
Common questions
Does landed cost include tariffs added after I ordered? Yes. Duty is assessed when goods clear customs, at whatever rate applies that day. A tariff change between purchase order and arrival changes the landed cost of that shipment, which is why per-receiving tracking beats a standard cost set once a year.
What if I use DDP shipping? Delivered duty paid means the supplier's price already includes freight and duty. The landed cost sits closer to the invoice, but ask for the breakdown anyway; DDP suppliers bundle duty at their own estimate, and you still want to know what the tariff portion is.
How is landed cost different from COGS? Landed cost is per unit, sitting in inventory. COGS is landed cost times units sold in the period. Get the first right and the second follows.
Where this shows up in our work
This isn’t textbook material for us; it’s the day-to-day of keeping seller books right. See how we handle it in practice:
Monthly Ecommerce Bookkeeping →