Inventory

[Thierry888]

Hi

When determining the markup price per unit, I will take into account the total cost per unit (i.e. unit cost + freight cost + local charges)

1. On MYOB, when entering a purchase (item), the unit cost will be recorded and linked to inventory.

The freight cost and local charges are entered separately under cost of goods sold (as service) and not linked to the items.

Is there a better way of doing it?

2. To calculate the total cost per unit, I need to workout manually the freight cost + local charges per unit, and then add the unit cost.

The freight cost+local charges have a separate account in the cost of goods sold

Can MYOB can workout the freight cost + local charges per unit?

3. Should the closing inventory include the freight + local charge?

In my cost of sales, I have purchase and freight charges on separate lines

Appreciate any feedback.

Thanks

Thierry

[CloverQ]

Hi @Thierry888 

There's one way I'd suggest exploring, if you haven't already, is setting up the freight cost and local charges as items as well, then create a new item set it as the finished product built from the original item + freight cost + local charges, the cost of the components will transfer into the cost of the the finished product. 

Here are the detailed guide on building items and Auto-building items, please do test it out first to see if this method would suit your company file set up and reporting requirements. You can make a copy of your company file, rename it then use the copy to test it out with real data. 

[Mike_James]

Hi @Thierry888 , see also this help topic on including landed costs in inventory.

[Thierry888]

Hi @Mike_James  and @CloverQ 

Thanks for the info.

Is this a common practice in Australia to include the landed cost in the inventory when preparing financial report?

I understand this practice is good for calculating the business margin but can be done manually.

If we have a project based for 5 years, and allocate all the expenses and income to the "Job", I think the results will be same whether or not landed cost is allocated in inventory. Now , how accurate is the Job reporting??

With exeption of preparing financial report for a particular year, if land cost is in the inventory and there's a lot of inventory, the margin will be greater.

Correct if Im wrong

Thanks

Thierry

[Mike_James]

Hi @Thierry888 , in accordance with generally accepted accounting principles and standard accounting practice, inventories should be valued at the cost of bringing them to their current state, therefore landed costs included. Your purchase of inventory for a long-term job may be upfront, and consumed over the life of the job, so if the landed costs were expensed in year 1, the profit for that year would be under-stated. 

Job reporting is as accurate as the principles/processes behind it. 

[Thierry888]

Hi @Mike_James 

Thanks for your help.

Currently, the landed cost It was under "service" , allocated to appropriate charge account;. and then linked to a "Job"

I am going to set the landed cost as item.

Regarding landed cost for Item, should I tick :

1. I buy this item -- under what account

2. I sell this item -- under what account

3. I inventory this item -- under what account

Thanks

Thierry

[Thierry888]

Hi @Mike_James 

Further to below, landed costs will be itemised to inventory, how to know the value of landed cost as it is also separately displayed on the financial accounts

Thanks

Thierry

[Mike_James]

Hi @Thierry888 , are you following the set-up i the link that I posted? If so then you will have the following:

- your items as usual

- your inward freight cost accounts in the GL as usual

- a new account next to these called "transfer costs to inventory" or similar

- a new item called Landed costs, I buy this item is ticked, and the new account above selected

Then for a typical purchase:

- work out the full cost of the item/s (separately, eg on paper, excel, whatever), with landed costs apportioned by value or your preferred method

- enter the inventory at the fully-costed unit price

- add a line at the end, with a quantity of -1, and the price being the sum of all costs added in your costing

This purchase should then total to the amount you owe the supplier. Stock is then correctly valued, and gross margins are accurate. 

The freight accounts continue to accumulate the inwards costs, and the new account shows how much of that has been taken up in inventory.