Question 1

What is value-based cost allocation?

Accepted Answer

It spreads freight, duty and other shipment costs across your line items in proportion to the value of each line. If a line accounts for 40% of the total, it takes 40% of the costs. Each line takes a share in proportion to what it cost. The right basis for duty, which is levied on customs value, and a reasonable default for mixed shipments.

Question 2

Which allocation method should I use?

Accepted Answer

Match the method to what drives the charge. Duty follows customs value, so allocate it by value. Sea freight priced on cubic metres follows volume, air freight follows weight, and per-piece handling follows quantity. On a mixed container, allocating everything by value alone can give a heavy cheap item and a light expensive one close to the opposite of their fair share.

Question 3

How is landed cost calculated here?

Accepted Answer

For each line, allocated cost is that line’s share of the basis divided by the total basis, multiplied by the total additional costs. Landed cost per unit is then the original line cost plus allocated costs, divided by quantity.

Question 4

What does the Value % column show?

Accepted Answer

The share of the shipment that each line represents on this basis, which is exactly the share of the additional costs it receives. Lines with a higher percentage absorb proportionally more.

Question 5

Should I include import GST or VAT in the costs I enter?

Accepted Answer

No, not if you can claim it back. Recoverable import tax is not a cost of the goods, so putting it in overstates your landed cost and your inventory value. Customs duty is different: it is unrecoverable and does belong in landed cost.

Question 6

What happens when the freight invoice arrives after I have already sold some units?

Accepted Answer

A calculator cannot help with that, because it has no record of what you sold or at what cost. Recalculating gives you the right number going forward, but the units already sold keep the understated cost. Closing that gap needs dated cost layers rather than a spreadsheet or a calculator.

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