Landed Cost per Unit: Allocate the Shipment

A supplier's unit price is only one part of the cost of making inventory available for sale. A landed-cost worksheet can add inbound freight, handling, and other documented acquisition charges. Define the scope before using the result in pricing. Outbound customer delivery, advertising, and general administration may belong elsewhere in the contribution model rather than in the inbound inventory cost.

Worked calculation

Suppose a shipment contains 500 identical units at $12 each. Inbound freight is $600 and receiving handling is $150. The modeled landed cost is $6,750 in total, or $13.50 per received unit. If 20 units are unusable and the business receives no supplier credit or recovery, spreading the same $6,750 across the 480 usable units gives $14.0625 per usable unit. Rounding the display to $14.06 does not change the total cost used in later calculations.

Mixed shipments require a defensible allocation base. Imagine 100 heavy units and 100 light units sharing $600 of freight. If the heavy units weigh three pounds each and light units weigh one pound each, total weight is 400 pounds. Allocating by weight assigns $450 of freight to heavy units and $150 to light units, or $4.50 and $1.50 per unit respectively. An equal-unit allocation would assign $3 to each and obscure the heavier product's transport burden.

Decision checks and limits

Weight is not always the best explanation of the charge. A carrier may bill using space, shipment minimums, or a quoted pallet amount. Use the basis supported by the actual shipment and document any managerial allocation choice. A split is a way to assign a shared cost, not proof that removing one product would reduce the total freight by its allocated share. For a decision about a changed shipment, request or model the changed charge directly.

Separate recoveries and credits from the original invoice so the worksheet can be reconciled. Use actual documented amounts for any applicable import or mandatory charges rather than assuming a general rate. This page supplies no tariff, tax, or carrier schedule. Revisit the landed-cost estimate after the shipment is received, record usable quantities, and explain differences between planned and actual cost. That creates a practical connection from purchasing assumptions to the cost used in a selling-price decision.

Apply the calculation

1. Define the landing point

   Specify which location and inventory condition the cost represents. Keep later customer fulfillment costs identifiable.

2. Choose supported allocation drivers

   Use weight, volume, pallets, or another documented basis for each shared charge, rather than one convenient base for every cost.

3. Reconcile the received batch

   Match invoices, credits, and usable counts to the worksheet, then retain full precision when calculating product margin.

Method references: OpenStax: Merchandising, manufacturing, and service costs. Accessed October 22, 2026. All dollar figures are hypothetical worked examples.