Landed Costs in Odoo

Landed cost is the total price of a product once it has arrived at buyers’ hand. The total cost of a landed shipment including purchase price, freight, insurance, and other costs up to the port of destination.

This includes the transportation fee, duty, handling fees, taxes, insurance, currency conversion, crating, handling and payment fees.etc. These prices are added and divided to get the actual selling price of the product.

Landed Costs = The purchase price of the product + Any additional charges to get the product to the buyer’s hands.

The way of calculating landed cost will vary according to the company and products which they are handling, etc. In some instances, it may also include the customs duties and other taxes levied on the shipment.
We add these Freight, Insurance etc cost as service product and differentiate it with the normal product.
The Service costs specify for each landed service gets calculated on the purchase order and define as a Total Landed cost.

Odoo handles this by asking you to do two things:
1. Record the purchase price and the additional charges.
2. Allocate the additional charges to the product(s).

Before moving to create landed costs,there are some configuration settings to be done or checked out.

Configuration Setup
 
1 ) Inventory Configuration
Foremost thing that we need to do for configuring the landed cost in inventory is to activate landed costs.To do so move to Inventory –> Setting –> Stock accounting.
Make sure that the fields called
→ Include landed costs in product costing computation
→ Perpetual inventory valuation (stock move generates accounting entries)
    are checked.

Figure :- Inventory Configuration.

2) Purchase Configuration

Moving to purchase configuration, Purchase→ Configuration→ Purchase Order→ Costing Method.               
Make sure this field is checked,because landed works on ‘Real’ price costing method. It is necessary to check because by default the costing method will be ‘Standard’ and if we need to change, this setting to be done.

Figure:- Purchase Configuration

3) Product Category Configuration

Go to Products → Configuration → Product categories
Set the product category for the products (other than product type services), it applies costing method as Real Price and Inventory Valuation as ‘Perpetual(automated)’, because landed costs works only to this costing method and inventory valuation.
Also set various stock accounts which includes  Stock Input, Stock Output, Stock Valuation, Stock Journal, Income Account and Expense Account in product category to allow automatic stock entries to be posted.  

Landed Costs are only supported with Perpetual (real-time) Inventory set to the Real Price cost method.

Figure :- Product Category Configuration

4) Landed Costs Type Creation

Landed costs types are generally created as products of type service. They are expenses added to the landed cost. Creating Landed Cost Type includes

→ Setting the split method as required.
→ Select product type as ‘Service’.
→ Fill the field cost too,also editable in landed cost form view.

How to Compute Landed Costs?

We can create landed cost from Inventory → Landed Costs. Then click on create button, select the picking(s) to which you want to attribute landed costs. Select the account journal, it is always recommended to create a specific journal for landed costs. The cost lines block are  where we select the landed cost products that is needed to apply in picking. The Landed cost type listing down will be the one we have already created as landed cost type. Select a landed cost type or else we can create other landed costs type by clicking ‘Add an item’.
On selection of landed cost type the split method will get automatically loaded with one which we have already created. It is possible to change the split method if needed.
On computing the landed costs we get valuation adjustment lines, where we are able to see how the landed costs are being splitted among the products.

There are various method using which the landed costs can be divided among the products called Split methods. There are various split methods namely,

Equal
    It equally splits the expenses for the product lines.

      2) By Quantity
    Allocates the cost based on quantity.

      3) By Volume
    Allocates the cost based on volume.

      4) By Weight
    Allocates the cost based on weight.
 
      5) By Current Cost Price
           Computed based on the current cost price.

After computing we can post the entries by clicking validate button. On clicking the button the journal entries get posted and will look like as in the figure below.

Figure :- Journal Entry

The landed cost will be deducted from the cost account linked to the landed costs product (this is the expense account defined in the product category) and transferred to the stock valuation account. The Quant will now be updated to the correct inventory value.