Landed Cost #2

Can someone explain how landed costs works?

Is is based on actual costs or imputed cost per unit?  

We know an average cost per unit, but not always the actual 
shipping/handling costs until the vendor invoice arrives.  We would like to 
impute a landed cost per unit, regardless of actual cost.  Is this how it 
should be done?  The actual landed cost varies by order/quantity/dollar value 
from some of our vendors.

Another question is: Does everything we sell have to be set up as an 
inventory item in order to use landed cost?

If we order a stock item (inventory item) and the customer order is already 
created in SOP, and the landed cost is higher, will it automatically update 
the cost when the item is received and the landed cost is applied.

When the vendor invoice is finally received and being keyed, how does landed 
cost affect the process?

Thank you for all of your help. 
0
debbie4402 (120)
11/6/2006 5:49:02 PM
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Hi Debbie,

Let me try and answer some of these questions.

The cost of an inventory item consists of the cost on the supplier's invoice
plus additional costs such as haulage, duty, etc.  Landed costs allows you
to add these other costs to the cost of the inventory item being purchased.

You first create each landed cost in inventory.  You specify the supplier of
the service and the way the additional cost is calculated.  During receipt
of the goods, you apply the cost to the receival and apportion it over the
shipment by value or quantity.  You can also add a cost to a single item in
a shipment.

The cool thing about landed cost is that it allows you to book each
additional cost to the relevant vendor's payables management account.


" Is is based on actual costs or imputed cost per unit?"

This depends on the information that you have at the time the goods are
received.  Under ideal conditions companies have the actual costs at the
time the goods are being received.  During the receival they can enter the
actual cost of the additional charge.  If they don't have the actual cost,
they can book an estimate until the actual charge is known.

"We know an average cost per unit, but not always the actual
shipping/handling costs until the vendor invoice arrives. "

You can book the estimatated cost.  When the actual cost arrives, you can
match the invoice against the shipment and write off the difference to an
expense account.  Have a  look at the purchase order manual about matching
invoices to shipments.

"Another question is: Does everything we sell have to be set up as an
inventory item in order to use landed cost?"

I am not sure.  I have never tested this.

"If we order a stock item (inventory item) and the customer order is already
created in SOP, and the landed cost is higher, will it automatically update
the cost when the item is received and the landed cost is applied."

The cost of good sold amount is calculated when the invoice is posted, not
when the invoice is created.  So as long as you post the invoice after the
goods have been received, the cost of goods sold amount will reflect the
changes in the costs.

"When the vendor invoice is finally received and being keyed, how does
landed cost affect the process?"

We process inventory receivals as follows:

Enter the receipt against the shipment.  This really means processing the
suppliers portion of the receipt.  We choose shipment/invoice as the
receivals type.

Apportion the individual landed costs.  Click on the landed cost button near
the bottom of the screen and apply the costs.  Care must be taken to choose
the apportionment method.  You can apportion by value or quantity.

Add those landed costs that apply to individual items on the shipment.  Use
the item unit cost expansion button and add the landed cost there.  Note
that these have a classification of line while the others say apportioned.

The g/l distributions will be as follows:

Dr inventory     1000.00
Cr a/p                700.00
Cr accruals         300.00

The accruals amount represents the total landed costs.  The a/p amount will
be booked to the supplier's a/p account.

We then use the matching window to match the invoices for the landed costs
to the landed cost amounts on the shipment.  This moves the amounts from
accruals to a/p.  The landed cost invoices then shop up in each vendors a/p
account.

Dr accruals        100.00
Cr. a/p               100.00

Dr accruals         200.00
Cr a/p                 200.00

Hope this explanation helps.  It takes a little time to work out the
operational logic of landed costs.  Test this a bit and then ask additional
questions if some things still don't make sense.

"Debbie" <Debbie@discussions.microsoft.com> wrote in message
news:52D04FD2-EAD6-4B76-B5AC-4DB271B88012@microsoft.com...
> Can someone explain how landed costs works?
>
> Is is based on actual costs or imputed cost per unit?
>
> We know an average cost per unit, but not always the actual
> shipping/handling costs until the vendor invoice arrives.  We would like
to
> impute a landed cost per unit, regardless of actual cost.  Is this how it
> should be done?  The actual landed cost varies by order/quantity/dollar
value
> from some of our vendors.
>
> Another question is: Does everything we sell have to be set up as an
> inventory item in order to use landed cost?
>
> If we order a stock item (inventory item) and the customer order is
already
> created in SOP, and the landed cost is higher, will it automatically
update
> the cost when the item is received and the landed cost is applied.
>
> When the vendor invoice is finally received and being keyed, how does
landed
> cost affect the process?
>
> Thank you for all of your help.


0
news_jamrock (304)
11/9/2006 9:56:14 AM
hi debbie,

try to find the landed cost in Great Plains Help...you could find there
How Landed Costs are apporioned, Receivings Landed Cost apportionment,
and many more that explains about the Landed Cost...

i hope this helps

stephen

0
slgloria (35)
11/10/2006 12:40:20 AM
hi debbie,

try to find the landed cost in Great Plains Help...you could find there
How Landed Costs are apportioned, Receivings Landed Cost apportionment,
and many more that explains about the Landed Cost...

i hope this helps

stephen

0
slgloria (35)
11/10/2006 12:40:34 AM
Jamrock has given you a great start into landed costs.  A good description is 
not available in GP help, however.  Our book Inventory Control Techniques has 
a number of pages on this topic.  If you will send me your email address, I 
will send you these pages with my compliments.

RWhaley@accoladepublications.com

-- 
Richard L. Whaley
Author / Consultant / MVP
Documentation for Software Users

For help learning and better using Dynamics GP,... check out our books at 
http://www.AccoladePublications.com



"slgloria" wrote:

> hi debbie,
> 
> try to find the landed cost in Great Plains Help...you could find there
> How Landed Costs are apportioned, Receivings Landed Cost apportionment,
> and many more that explains about the Landed Cost...
> 
> i hope this helps
> 
> stephen
> 
> 
0
info4071 (3005)
11/11/2006 1:06:01 AM
Reply:

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