How to realize true cost of mixed inventory including freight for the total load as a whole??

USA Discussion in 'General Accountancy Discussion' started by DRLCo, Sep 11, 2017.

  1. DRLCo

    DRLCo

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    Hi, This is really a book keeping question but maybe I can get help here... I'm trying to figure a realistic way to figure the true cost of individual inventory items that come in on freight (40k LBS+).
    For example: I order 1400 T-posts, the weight for those 1400 posts add up to 12,200 pounds, the purchase price for the 1400 posts total is $6000

    on the same truck I have other inventory with different costs and different weights some inventory items are heavy like the T-posts and some items are light, Example: 1000 T-post clips only weighing 20 pounds, purchase price is $40.00.

    These are 2 examples of the 10 items on the truck (1 light item and 1 heavy item) and the other 8 items are of similar characteristics (heavy and light)

    Now the next element to factor in is the freight of the 10 items on the truck adds up to 41, 500 pounds and the freight cost is $1800 to get it to my door.


    This may be and extremely easy question for most of you but for some reason its eating my brain and want to make sure Im realizing true cost of my products so I know the exact amount to mark up my products to realize a profit. The easy thing to do is to just sell these products by weight but for this scenario I dont have that luxury, If there is a formula out there Im overlooking please point me towards it, and from that formula I can create an excel calculator to figure true costs quickly.

    Thanks everyone, Im excited to hear your advise!!

    John/"opening a ranch supply store soon"
     
    DRLCo, Sep 11, 2017
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  2. DRLCo

    Steve-LevelUp

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    The allocation of costs are generally subjective, but the need for them to be 'reasonable' is the most important thing. If you were to simply take the total shipping costs and evenly spread it over the number of items, then that would give you one figure. Alternatively, you could break it up by weight. Somehow, you need to take the total cost and allocate it in some way among the inventory received. In the end, so long as the method you use you believe is reasonable, with the applicable backup worksheet.

    There is no 'right' answer here as every situation is different.

    In my view, you should determine a cost allocation that reasonably represents the per item shipping cost that would be reasonably close every order so that you do not have vast changes in shipping costs for pricing purposes.

    I don't think that was what you were looking for, but I hope it helps.
     
    Steve-LevelUp, Sep 11, 2017
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