The costs provided in the table below are associated with buying a quantity larger than immediately needed.
What Is the total landed cost based on this table?
Cost CategoryCost
Custom fees$125
Freight$700
Warehouse rent$200
Matenal cost$500
A . $825
B . $1,325
C . $1,400
D . $1,525
Answer: D
Explanation:
The total landed cost is the sum of all the costs associated with buying a quantity larger than immediately needed, including the cost of the product, the custom fees, the freight, and the warehouse rent.
Based on the table, the total landed cost can be calculated as follows:
Landed cost = material cost + custom fees + freight + warehouse rent Landed cost = $500 + $125 + $700 + $200 Landed cost = $1,525
Therefore, the correct answer is D. $1,525. The other options are not correct, as they either omit some of the costs or use incorrect values. The total landed cost reflects the direct costs only to move the product from the factory floor to the customer. It is an important supply chain KPI in inventory management, as it helps to determine the optimal order quantity, pricing, and profitability of the products12.
References:
What is Landed Cost? | Calculation and Tips to Improve – ORBA Cloud CFO
What is Landed Cost & Why is it Important | Finale Inventory
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