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jecalderon
Level 5

Trouble understanding the difference between COST, LANDED COST and AVERAGE COST

I have been troubled with the  issue of COST . I have called support several times and there seems no one answering the phone with a straight  answer. They all look just as confused as I am!!

 

Looking at QuickBooks Enterprise Advance Inventory. I need help in definition of  COST, SALES PRICE , LANDED COST and AVERAGE COST.

 

Please, can anyone confirm if AVERAGE COST is the same as LANDED COST?  It looks to me that these terms are use interchangeably. ALL QBD reports only deliver report of AVERAGE COST.  I find no report pointing to  LANDED COST. 

 

 From inspection of the purchased Inventory Item dashboards, the COST  field is populated with the price from the vendor Invoice at Receiving. At the same time, QuickBooks allows to determine  LANDED COST from relationship of expenses associated with inventory purchases such as container shipment, taxes, etc... This number shows after adding landed cost..

 

The main Inventory windows reads AVERAGE COST and this is where things get al  confusing. 

 

From the detail Inventory Item information windows looks like this:

lanCostimage.png

 

The main Inventory windows reads AVERAGE COST and this is where things get al  confusing.

 

 

lan2Costimage.png

 

This is confusing as I am not sure if item COST field needs to be replaced with the LANDED COST.  This will be relevant  in order to get a correct picture of MARGIN and MARK UP pricing.

 

And at the same time, not sure what the average cost refers here.  I always considered Average cost as the average of an item in the inventory received at from possible different vendors, dates and at a different purchase prices.  But I am not sure if the COST field is mean to be replace with the calculated LANDED COST.

9 Comments 9
jenop2
QuickBooks Team

Trouble understanding the difference between COST, LANDED COST and AVERAGE COST

Allow me to join you here and answer your inventory-related questions, jecalderon.

 

Cost is the actual amount of the item when your purchased it, while Landed cost is the sum of expenses associated with shipping a product. Typically, the term refers to the costs connected with international shipping like taxes and fees.

 

Average cost on the other hand is the sum of the cost of all of the items in inventory divided by the number of items. To put it simply, cost is the actual amount of the item, landed cost is the amount of the item, plus the shipping and handling expenses, and average cost is the average amount you spent for of all items you have on hand. 

 

This also means that the AVERAGE COST is not the same as LANDED COST. This is because QuickBooks will only factor the amount in the Cost field when calculating the average cost. 

 

Additional details about this are discussed in the following articles: 

 

 

At the moment, there's no specific report about landed cost in QuickBooks Desktop. However, you can open your Chart of Accounts and run Quick Report for the Landed Cost account. Here's how:

 

  1. Go to your Chart of Accounts and look for the landed cost account.
  2. Right-click on it and select Quick Report

 

landed cost.PNG

 

Let me also share these articles for additional references:

 

 

Please let me know if you have other questions about inventory-related costs. We're always here to make sure they're all taken care of.

jecalderon
Level 5

Trouble understanding the difference between COST, LANDED COST and AVERAGE COST

Ok with the clarification. But still not sure why the is no report on LANDED COSTS and why is no  functionality to apply  Mark Ups and Margins to the LANDED COST.   Is there a reason for this?

 

 

RoseJillB
QuickBooks Team

Trouble understanding the difference between COST, LANDED COST and AVERAGE COST

Hello there, jecalderon.

 

My colleague is correct that the landed cost report and the other following features are not yet available in QuickBooks Desktop (QBDT).

 

Since QuickBooks is made to save accounting records, it's not specific to pulling up complex reports used by other business owners. I recommend you send feedback directly to our product engineers. This way, we can comprehend what our customer demands the application.

 

Here’s how:

 

  1. At the top, select the Help menu.
  2. Choose to Send Feedback Online then click Product Suggestion.
  3. Type in your feedback or feature request.
  4. Click the Send Feedback button.

 

If you have further queries about QuickBooks, let me know in the comments below. I'll be here immediately to assist you. Have a good one!

aht1
Level 1

Trouble understanding the difference between COST, LANDED COST and AVERAGE COST

 

This does not make sense to me. 

 

"Average cost is the sum of the cost of all of the items in inventory divided by the number of items. 

To put it simply, cost is the actual amount of the item, landed cost is the amount of the item, plus the shipping and handling expenses, and average cost is the average amount you spent for of all items you have on hand"

 

The problem: Inventory transactions may have two DIFFERENT dates.

 

So how would QuickBooks use the below to determine "quantity" and "cost" on hand?

 - Entered/Last Modified (Date and time)

 - (possibly different) Date

 

 

 

 

MichaelaS
QuickBooks Team

Trouble understanding the difference between COST, LANDED COST and AVERAGE COST

Let me define the two different dates related to processing inventory transactions in QuickBooks Desktop (QBDT). @aht1 

 


If you have any questions about average cost, you may utilize running the Inventory Valuation Summary Report. It will display how QuickBooks calculated the average cost of the item. Here's how to run the report:

 

  1. Select Reports, then select Inventory.
  2. Select Inventory Valuation Summary, then set the dates to All.
  3. Double-click the item in question.

 

I'll leave this article to further guide you in adjusting the quantity or total value of your products and to track every purchase and sale: Adjust your inventory quantity.

 

Don't hesitate to post again if you have other questions about QuickBooks. I'm always here to help. Take care.

aht1
Level 1

Trouble understanding the difference between COST, LANDED COST and AVERAGE COST

Screenshot 2024-03-12 104529.png

 

 

 

 

 

 

 

 

 

 

RoseJillB
QuickBooks Team

Trouble understanding the difference between COST, LANDED COST and AVERAGE COST

Hi there, @aht1. I'll share the details with you explaining the average landed cost in QuickBooks Desktop (QBDT).

 

Inventory costing can be tracked using the average cost method. This method calculates the average cost by dividing the total cost of all purchases by the number of items in stock. 

 

When a sale is made, the average cost is used to determine the cost of the item sold. The cost does not change until a new purchase is made at a different cost. The average cost method takes into account the last purchase as well as the previous purchases until all quantities are accounted for.

 

To elaborate on the columns highlighted in yellow, the Unit Cost is the total expenses incurred by a company to produce, store, and sell a particular product or service. This section is manually entered during the item setup, as seen in the screenshot below. Moreover, the Amount is the product of the Quantity on Hand and the Unit Cost.
costs.png

 

To better explain the following amounts reflected on the report, I'd recommend contacting our Technical Support Team. This is to allow our support to initiate a screen-sharing session that would allow customers to convey the details through sharing screens while maintaining their privacy. Also, it is to determine where the following amounts are coming from, as filtering the dates would matter. Get in touch with them by following the steps below:

 

  1. Go to this website: https://quickbooks.intuit.com/learn-support/en-us/contact
  2. Select QuickBooks Desktop for the product section.
  3. Choose an Edition from the dropdown.
  4. Type in your concerns in the designated section, and click Continue to proceed.
  5. From the options, select either Chat with us to start a conversation or Receive a Callback to get a spot in line and call you back.

 

Additionally, refer to this article for other options when contacting them. You can also scroll down to the bottom to take note of their support schedule and hours: Contact QuickBooks Desktop support

 

Moreover, I’ll add this article to learn more about the principles of reporting data. You can also check on how you can customize them more effectively: Understand reports.

 

If you have any further inquiries about managing reports, feel free to visit the Community. I wish your business the best of luck in prospering. Please take care and stay safe.

WA15
Level 1

Trouble understanding the difference between COST, LANDED COST and AVERAGE COST

Hi there,

I was wondering if average cost includes taxes paid on that product. Or is average cost the before tax amount paid?

MirriamM
Moderator

Trouble understanding the difference between COST, LANDED COST and AVERAGE COST

Hello there, WA15.

 

I'm here to provide you with some information on how QuickBooks Desktop (QBDT) calculates the average cost. 

 

The average cost does not include taxes paid on the product. When you sell inventory using QuickBooks, the software uses the weighted average cost to calculate its value and the amount debited to COGS. This means that the cost of all items in inventory is added up and divided by the total number of items to determine the average cost.

 

If you need any clarification regarding the average cost of an item, you can refer to the Inventory Valuation Summary report. This report provides a detailed breakdown of how QuickBooks arrived at the average cost of the item in question.

 

To pull up the report, here's how:

 

  1. Go to the Reports menu. 
  2. Select Inventory.
  3. Choose Inventory Valuation Summary.
  4. Set the dates to All.
  5. Double-click the item in question.

 

It is also important to understand how QuickBooks handles inventory assets, average cost, and Cost of Goods Sold (COGS) in QuickBooks. I have attached an article that can assist you in computing the average cost and identifying which report will aid you in inventory management: Understand inventory assets and cost of goods sold tracking.

 

If you have any further questions about the average cost, feel free to comment below, and I will be happy to assist you. Have a fantastic day!

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