Product
What a Unit Actually Costs: Landed Cost on the PO Line
The quoted unit price is an input to your cost, not your cost — and the difference is only worth computing if it survives all the way to receiving.
The quoted price is the smallest part of what a unit costs
A supplier quotes six dollars a mug, that number goes into the spreadsheet as "cost," and everything downstream inherits it. But the quote is the price of the mug at the supplier's door. It is an input to the cost, not the cost.
Under US GAAP, inventory is measured at cost including all the expenditures needed to bring it to its present condition and location — the invoice price plus inbound freight, duties and tariffs, brokerage, insurance, and handling. That is the accounting statement of an operational fact: a mug sitting in a container at the port is not sellable inventory. Everything you spend to make it sellable is part of what it cost you.
The gap matters because it only ever moves in one direction. Leave freight and duty out of unit cost and you understate COGS and overstate gross margin. The error flatters you, which is exactly why it survives — nothing about a healthy-looking margin prompts anyone to go check it. And because landed costs are capitalized into inventory, the same understatement propagates outward: into the inventory value on your balance sheet, into per-SKU margin, and into every dollar budget you set from those numbers.
| Dimension | Quoted unit price | Landed unit cost |
|---|---|---|
| What it includes | Merchandise only, at the supplier's door | Merchandise plus freight-in, duty, brokerage, insurance, handling, supplier tax |
| Where it comes from | One supplier quote or price list | Several invoices arriving at different times from different parties |
| What it's right for | Negotiating with the supplier; comparing two suppliers on merchandise alone | Valuing inventory, computing margin, setting a purchasing budget |
| Effect if used as your inventory cost | Understates COGS, overstates gross margin — an error that flatters you | Margin reflects what you actually spent to make the unit sellable |
Two different numbers that get called "cost."
A shipment-level cost has to become a line-level cost
Here is the structural problem. Freight and duty invoices arrive at the shipment level — one forwarder bill for a container, one duty payment for an entry. Inventory is valued at the SKU level. Something has to turn one number into many, and that something is an allocation.
The allocation happens whether you design it or not. Skip it entirely and you have implicitly decided that freight costs nothing per unit. Spread the bill evenly across every unit on a mixed pallet and you have decided that a six-dollar mug and a thirty-dollar tumbler impose the same burden. On a pallet of similar goods, that is close enough. On a mixed one it is wrong in a specific and predictable direction: it taxes cheap, high-volume items and subsidizes expensive ones.
The standard drivers are value, weight, volume, and quantity, and mature practice mixes them by cost type. Duty tends to track declared value, because that is what it is assessed on; a forwarder's invoice tracks weight or volume, because that is what you are billed for; per-item handling tracks quantity, because touching an item costs the same whatever it is worth. The driver is not a preference — it is a claim about what actually caused the cost.
landed unit cost = unit price + (allocated freight + duty + fees + supplier tax) ÷ units on the line
One shipment, one $360 freight bill, two lines: 100 mugs at $6 ($600) and 20 tumblers at $30 ($600).
Allocate by quantity: 120 units share $360, so every unit carries $3.00. The mug lands at $9.00, the tumbler at $33.00.
Allocate by value: each line is half the shipment's value, so each absorbs $180. That's $1.80 per mug and $9.00 per tumbler. The mug lands at $7.80, the tumbler at $39.00.
Same bill, same total, same two SKUs — and a mug cost that differs by $1.20 a unit. The driver is not a formatting choice. (Illustrative numbers.)
The cost that reaches receiving is the one that sticks
Choosing a driver only matters if the number survives. The common failure is not picking the wrong basis — it is computing landed cost correctly in a spreadsheet three weeks after the container clears, by which time the purchase order was drafted, sent, and received at the quoted price. The reconciliation is real work that changes nothing downstream, because every decision it should have informed has already been made.
Landed cost has to travel with the line: attached from the moment the line exists to the moment the stock is received.
That is the shape of it in Assisty. Items you are still considering sit on the Purchase List priced with each supplier's tax and currency, so the staged number is supplier-specific rather than a raw quote. When you create orders, Atlas splits the selection by supplier with exact item counts and order values and asks which location receives the stock. The purchase order itself carries tax types and landed cost per line, and you receive against it when stock arrives — with that allocation, and your own custom columns, carried through every step. Nothing is re-keyed at the receiving end, which is precisely the step where cost otherwise reverts to the quote.
| Stage | What Assisty does |
|---|---|
| List | The Purchase List holds items you're still reviewing, priced with each supplier's tax and currency |
| Group | Splits your selection by supplier — exact item counts, exact order values — and asks which location receives the stock |
| Draft | Seeds the PO from the suggested quantities, with tax types and landed cost per line |
| Send | Review the line items, then email the PO straight to the supplier |
| Receive | Receive against it and sync stock, with landed-cost allocation and your custom columns carried through every step |
Where a per-line cost has to stay attached.
What a real cost changes about the next order
A real unit cost is not an accounting artifact. It is an input to the next order. The Smart Buying Table computes every suggestion from your sales velocity, lead times, and incoming stock, rounds to your case sizes, caps at your maximum stock levels — and prices it, with a Cost on every row and a running selection total reading something like "3 selected · 164 units · $1,276." Those dollars are what you are actually deciding against. Tell Atlas you have a thousand dollars to spend and fit-to-budget defers the least-urgent items and shows exactly what got cut; every change shows a was→now chip with per-row undo, and nothing is committed until you create the order.
All of that runs on dollars. If those dollars are quoted prices, the budget is one for merchandise at the factory gate rather than for landed inventory.
Worth being precise about the boundary. Assisty carries and allocates cost per line and keeps it attached through receiving. It does not look up duty rates or HS codes for you, and it will not choose your allocation basis — the driver is a claim about your goods and your freight, and it should stay your call. What the system owes you is that once you have made that call, the number stops being a spreadsheet artifact and becomes the cost you actually buy against.