1. Procurement Management Implementation Guide
  2. Understanding Landed Costs

Understanding Landed Costs

Landed costs are costs that exceed the purchase price of an item. They are generally associated with the expected delivery charges of an order, but might also be for broker fees, commissions, and so on. Landed costs are additional fees incurred to deliver an individual item into inventory. Landed costs cannot be applied to the total cost of a purchase order. Also, landed costs are not taxable.

You can assign landed costs to a specific item and branch/plant or to a cost rule (a group of landed costs to which you assign a name). You set up landed cost rules in the Landed Cost Rule (41/P5) UDC table. After you create a cost rule, you can assign it to an inventory item, a supplier, a purchase order, or a detail line. By assigning landed costs, you can track the actual cost of purchasing an item.

When you assign landed costs to an item or cost rule, you define the calculation for each landed cost on a per item basis. You can add landed costs for an item based on:

  • A percentage of the unit price.

  • A monetary amount.

  • A specific rate multiplied by the weight or volume of the item.

For each landed cost, you can specify:

  • The effective dates.

  • The supplier to which the cost is paid.

  • The general ledger class code to which you apply the cost.

The general ledger class code determines the general ledger accounts for which the system creates journal entries for landed costs. You use AAI tables 4385 and 4390 to specify landed cost accounts.

You can also specify:

  • Whether to match the cost using the voucher entry program.

  • Whether to include the cost in item cost updates.

The system searches for landed costs that apply to a detail line in this order:

  1. Landed costs that are assigned to the item/branch on Landed Cost Revisions.

  2. A cost rule assigned to the detail line.

  3. A cost rule assigned to the purchase order.

  4. A cost rule assigned to the item and branch/plant on the Item/Branch Plant Info form.

  5. A cost rule assigned to the item on the Item Master Revisions form.

You determine at which point the system adds landed costs to a detail line. For example, you can add landed costs during the receipt process, the voucher match process, or as a standalone process.