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I have a list of items that were shipped from our manufacturers some of the items are Assets (machines etc.) and other are products we intend to sell. I simply want to include the other expenses that were associated with this particular purchase such as customs, shipment, transport etc. to each item but since some of them are our ASSETS they should also bare these expenses (and machines are costly and has major share in the invoice).

What will be the best approach to do it?


Regards,
 
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Yes, the final cost of each item should include the item's proportionate share of the transportation and other costs. This is true whether any given item will go into your inventory (for resale to customers) or onto your depreciation schedule as Machinery & Equipment.

Allocate the transportation cost to the individual items in proportion to their individual costs. For example if the cost of Machine A is 17% of the total cost of all the machines and inventory items, then allocate 17% of the transportation costs to Machine A.

Put your list of items into Excel along with the items' individual costs. A couple of simple formulas will then do the allocating for you.

Side note: The allocation method I described above (proportionate to the items' individual costs) is a very common one. However, in various given circumstances, some alternate allocation methodology might capture the economic realities better. Suppose for example I bought two items, one costing 100 and the other costing 200. I could simply allocate one-third of the freight to the first and 2/3 of the freight to the second, following the above-described method.

But suppose further that the first item weighs 4 times as much as the second, and I happen to know that the freight charges are based on weight. I'd be inclined, then, to allocate the transportation charges 80% and 20%, respectively, based on weight rather than cost.

Use whatever allocation method best reflects the given situation, in your opinion.
 
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We already established that you can add transportation costs.But you can also add any costs that are necessary to get that machine running and capitalize/depreciate that as well.

For example you buy a car lift for a mechanic shop, you have to include the price of transportation + the cost of installation of the lift.
 
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Yes, the final cost of each item should include the item's proportionate share of the transportation and other costs. This is true whether any given item will go into your inventory (for resale to customers) or onto your depreciation schedule as Machinery & Equipment.

Allocate the transportation cost to the individual items in proportion to their individual costs. For example if the cost of Machine A is 17% of the total cost of all the machines and inventory items, then allocate 17% of the transportation costs to Machine A.

Put your list of items into Excel along with the items' individual costs. A couple of simple formulas will then do the allocating for you.

Side note: The allocation method I described above (proportionate to the items' individual costs) is a very common one. However, in various given circumstances, some alternate allocation methodology might capture the economic realities better. Suppose for example I bought two items, one costing 100 and the other costing 200. I could simply allocate one-third of the freight to the first and 2/3 of the freight to the second, following the above-described method.

But suppose further that the first item weighs 4 times as much as the second, and I happen to know that the freight charges are based on weight. I'd be inclined, then, to allocate the transportation charges 80% and 20%, respectively, based on weight rather than cost.

Use whatever allocation method best reflects the given situation, in your opinion.
Thanks a lot I tired to do it on excel though the shipment doesn't have anything to do with the weight though but yea there are different values for different items and some of them are assets as I said.

There were three invoices shipped with this consignment so I added three invoices. Then calculated total amount for each item (total Qty X Unit price). Now divided Total Amount (item) by Invoice Value X 100 (to find its percentage in the voice value). Now this purchase value (lets say 20%) multiplied by the Total Expense (Customs, Transport etc.) to find its percentage in the Expense value then adding this value in the Invoice Total price to get the new price. Divide this price by Qty of that item to get the New unit price.
But I'm getting difference more than the total expense which is not possible this mean either this logic is wrong and/or I've messed up something here is the formula I made;

=ROUND(((((J40/'fs29621'!$I$71)*100)%*Purchase!$C$11)+J40)/H40,0)

Please also suggest me how you would have done in excel to achieve it.

Regards,
 
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Your description of your approach sounds fine. Without knowing what the cells in your Excel formula refer to, I can't comment on its accuracy.

Simple illustration: I have two invoices. On the first there are two assets, one priced at 100 and the other at 200; invoice total is 300.

On the second invoice there are also two items, with prices of 50 and 150, respectively; invoice total is 200.

The total of all four items = the total of the two invoices = 500.

So the first item is 20% of the total of 500; the second is 40%; the third and fourth are 10% and 30%, respectively. (Important: make sure your percentages total to 100, as in this case: 20 + 40 + 10 + 30 = 100. Check.)

Then I'd allocate the total freight / transportation cost to the four items in accordance with those percentages. If the total shipping for those two invoices was, say, 50, then the four items would be allocated freight cost of 10, 20, 5, and 15, respectively (again, make sure these total to 50).

If you're numbers aren't coming together the way they should, a couple of possibilities come to mind:

  • Are there other items on the invoice (taxes or other charges) that need to be allocated to the individual items? These might throw your calcs off if so.
  • Anytime there's rounding involved in the computations, there's a chance that the result might be off a tad, but it should only be a very small amount.
 

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