Scenario 1
The Landed cost amounts associated with an item is added to the actual asset value of an inventory item, allowing you to calculate profitability accurately.
For example, a purchase order has created for an inventory item with amount 5.
The Landed cost is specified in the Item Receipt
The corresponding IR GL impact will be as shown below.
This landed cost amount and the PO amount will be added to the Item cost in the item record.
And when proceeding to create the Sales order for this item, the landed costs will be included in the COGS amount.
The Item Fulfillment is
The GL impact of Item Fulfillment will be as shown below
And we can create a report to show this breakdown as shown in the below screenshot.
The above example shows the standard case of an item(the costing method of the item is average).
Scenario 2 – FIFO Costing Method
Another scenario with multiple transactions.
For item with FIFO costing method, created a PO for 2 quantities with rate 6. So the total PO amount is 12
Tha landed cost amount have entered in the IR as follows
So for 1 quantity of the item, the cost will be – 6+6+3 = 15.
And created a sales order for 1 qty of this item and created IF for the same. The COGS is 15 in the Item Fulfillment.
And the cost in the inventory item record as updated.
Then created another Purchase Order for 4 quantities with rate 8.
And created the Item receipt with the following landed cost amounts.
So for this case, the cost per item is – 8+2+4 = 14.
So in our inventory, we have 1 item with cost 15 and 4 items with cost 14. So the total value of the item will be – 15+(14*4) = 71.
Then the cost per item will be 71/5 = 14.2 (average cost)
Then created a sales order for quantity 2. and created Item fulfillment. The IF GL impact will be as follows.
So in this order, we have one item with cost 15 and another item with cost 14. So the COGS amount will be 15+14 = 29.
And in report we can see this breakdown.
Please find the screenshot for the IF amounts
The total amount of Landed Cost for an item can be displayed in the saved search as below
