I am looking into the landed cost module as a means of allocating various costs such as freight/duty to the purchased/finished products. However, I would also like to be able to add some indirect costs to the purchased/finished products as well, such as allocating a percentage of procurement/buyer salaries towards the products. The reason being, we feel this should be reflected in the product cost rather than living down in OPEX on the financials. We currently burden the cost of manufactured products by including the percentage of procurement/buyer salaries related to raw materials and components sourcing in our burden rate. Logically, we would want to likewise burden the purchased/finished products that aren’t manufactured with the percentage of the salary related to sourcing these finished good items to reflect the true cost.
In my initial research of the landed cost module, it appears you can add indirect costs to the items which I believe we could do here and come up with a way to fairly allocate the salaries towards these items. At the same time, I’m no expert in this area and was wondering if anyone else has done something similar or has experience with the landed cost module? The Material Burden percentage seems like an option to do this as well but I believe we are planning to use the landed cost module and my understanding is you can’t use both, but please correct me if I am mistaken.
Hopefully what I wrote out makes some sense but if not please let me know and thanks for any insight you can provide.
landed cost is more often used in cases where items are shiped across the ocean, (in a container) with lots of various items in that container, and where you distribute the costs of shipping across all the contents of that container.
Mtl Burden is simply a burden rate that you apply to parts. I dont believe that it is incompatible with Landed cost… instead it is added on as an additional cost (but I could be mistaken). If you declare a mtl burden rate to a part, then every time you buy that item, or make that item, then the cost will be multiplied by the mtl burden rate. This will work with Average, Average Lot, or FIFO costing methods.
Example, your item X is an average cost item, and you create a PO for $1 each… and it has a 5% Mtl Burden rate. Upon receipt the cost will be posted as $1.05 each.
So the screenshot attached is what I found in the Material Burden section of the Job Costing technical reference guide. It sounds like if you have a material burden percentage already entered for a part in the part record then you will not be able to enter any landed costs for the same part. I definitely understand that the main purpose of the landed cost module is to add on all the costs of bringing an item into the warehouse when shipping internationally, but that’s where I’m trying to understand any functionality around adding in the allocation of employee labor of bringing these items into stock as well, such as the warehouse receiving team and our procurement team. We allocate portions of their salaries to indirect labor for manufacturing overhead, so we would like to do the same with finished good items as well. But I wasn’t sure if this was even a common thing to do and how to approach it between these two options. In my research the landed cost module has a section for indirect costs that appeared to be a flat rate, but I’m not sure what would typically be put here?
