Landed cost is the true total cost of a purchased item once it reaches your warehouse: the unit price plus every cost required to get it there — freight, customs duties, insurance, and handling. Pricing or margin decisions based on unit price alone routinely understate true cost, especially on imported goods.

The landed cost formula

Landed Cost = Unit Price + Freight/Shipping + Customs Duties + Insurance + Handling/Other Fees. Shipment-level costs (freight, duties, insurance, handling) are usually billed as one total for the whole shipment, so allocate them across the unit count to get a per-unit figure for margin and pricing purposes.

Example: 500 units at $4.00 each, plus $600 freight, $250 duties, $50 insurance, and $100 handling for the shipment. Extra costs total $1,000, or $2.00/unit, making the landed cost $6.00/unit — 50% higher than the $4.00 unit price alone.

Use landed cost, not unit price, when setting sell prices or calculating true margin on imported or freight-heavy goods. A product that looks profitable at unit price can be thin or unprofitable once real landed cost is accounted for.

See also: the landed cost glossary entry, inventory valuation methods.