True COGS and Landed Cost Calculator
The supplier invoice is not your cost of goods. This adds freight, duty, inbound handling, packaging and the units you never get to sell, then shows you how far off the invoice price was.
True landed cost per unit
$16.99
Your true cost is $4.59 higher than the invoice price - 37.0% more. If your margins are calculated on the unit cost alone, every product report you have is overstating profit by that much.
- How far off the invoice price is
- $4.59
- Understated by
- 37.0%
- Landed before lossesEverything except the allowance for units you cannot sell.
- $16.31
- Duty per unit
- $0.81
- Loss allowance per unitThe cost of unsellable units, carried by the ones you do sell.
- $0.68
Import landed costs once and every margin figure updates - per product, per order, per batch, with the cost you actually paid kept against the units it applies to.
Put real costs behind your margins
Free plan up to 50 orders a month · no card required.
How this is calculated
Duty = Unit cost x Duty rateLanded cost = Unit cost + Freight + Duty + Inbound handling + PackagingTrue cost per sellable unit = Landed cost / (1 - Defect rate)- Unit cost
- The supplier's invoice price per unit before anything is added. On its own this is the number most stores mistakenly call COGS.
- Freight per unit
- Total shipment cost divided by units received. A full container spreads thinly; an air freight top-up order does not, which is why the same SKU can have different landed costs by batch.
- Duty
- Import duty on the goods value, set by HS classification and origin. Charged on the customs value, which for most stores is the invoice price.
- Defect rate
- The proportion of units received that never generate revenue. Divided into, not multiplied by, because the units you do sell have to carry the cost of the ones you do not.
- True landed cost
- What one sellable unit actually costs. This is the number that belongs in every margin calculation you run.
Worked example
A homeware brand imports a ceramic planter from Portugal, 2,000 units by sea:
| Supplier invoice | $12.40 | Per unit, ex-works |
|---|---|---|
| Freight | + $1.85 | $3,700 shipment over 2,000 units |
| Duty at 6.5% | + $0.81 | $12.40 x 0.065 |
| Inbound handling | + $0.35 | Brokerage and 3PL receiving |
| Packaging | + $0.90 | Retail box and insert |
| Landed before losses | $16.31 | |
| Defect rate 4% | / 0.96 | Breakages and QC failures |
| True landed cost | $16.99 | |
| Understated by | $4.59 | 37.0% above the invoice price |
The store believed this unit cost $12.40. It costs $16.99. At a $39 retail price that is the difference between a 68% gross margin and a 56% one, applied to every planter it has ever sold.
Why the defect rate is divided, not added
This is the step that catches out even experienced operators. If 10% of your units are unsellable, the instinct is to add 10% to the cost. That is wrong, and it understates the real figure every time.
Buy 100 units at $100 each and you have spent $10,000. Ten are damaged, so you sell 90. Those 90 units have to recover the whole $10,000, which is $111.11 each - not $110. The gap looks trivial at a 10% defect rate and stops being trivial fast: at 25% the naive method says $125 and the correct answer is $133.33. The rule is that losses are spread over what you sell, not over what you bought.
Landed cost is per batch, not per SKU
The most useful thing you can do with this number is stop treating it as a constant. The same SKU has a different landed cost every time you buy it, because freight rates move, exchange rates move, and the shipment size changes. A container of 5,000 units carries maybe $0.90 of freight each; a 400-unit air freight top-up to cover a stockout can carry $6.
This matters because of what it does to history. If you overwrite a product's cost each time you reorder, every historical margin recalculates at today's price and last quarter's numbers quietly change. A supplier price rise makes it look like you were always less profitable than you were. Keeping the cost that was actually paid against each batch is the only way historical margin stays true, and it is why cost history is worth tracking properly rather than as a single editable field.
What to include, and what not to
Include anything that had to be spent to get one sellable unit onto your shelf: goods, freight, insurance, duty, customs brokerage, inbound handling, retail packaging and inspection. If it scales with units received, it belongs here.
Leave out anything that happens after the sale is made: outbound shipping to the customer, payment processing, and advertising. Those are real costs but they belong to the order, not the unit, and mixing them in makes it impossible to compare products against each other. Warehouse rent is a judgement call - most stores are better off treating it as a fixed cost rather than trying to allocate it per unit, because the allocation is arbitrary and the number moves for reasons that have nothing to do with the product.
One thing worth adding that people rarely do: if you pay your supplier 60 days before the goods sell, that cash is unavailable for two months. It is not a cost in the accounting sense, but on a growing store it is the constraint that actually binds.
Questions people ask
Is landed cost the same as COGS?
Landed cost is what one unit costs to get to you, ready to sell. COGS is what you recognise when it sells. For most Shopify stores they should be the same number, and problems start when COGS is set from the supplier invoice while the freight and duty sit somewhere else in the accounts.
Should duty be calculated on the goods value or on goods plus freight?
It depends on your country's customs valuation basis. Many use CIF, which includes freight and insurance; others use FOB, which does not. This calculator applies duty to the goods value, which matches the common FOB case. If you are on a CIF basis, add your freight to the unit cost field first.
What is a normal defect rate?
For most consumer goods, 1% to 3% covers transit damage and QC failures. Fragile categories such as ceramics and glass run 5% to 8%. Apparel is usually low on defects but high on unsellable returns, which belong in the same field - if a fifth of returned garments cannot go back on the shelf, that is a real cost per unit sold.
How do I handle a shipment covering several SKUs?
Allocate freight by whichever measure drove the cost. Sea freight is priced by volume, so allocate by cubic metres rather than by unit count, or a shipment of pillows and candles will charge the candles far too much. Duty is per SKU because HS codes differ.
How often should I recalculate landed cost?
Every purchase order. Freight and exchange rates move enough between shipments that a cost set once a year is wrong most of the year. Recalculating per batch also means your historical margins stay accurate instead of being restated every time you reorder.
Related calculators
- Shopify Profit Margin CalculatorEnter what one order costs you and see what you actually keep.
- Break-Even ROAS CalculatorEvery store has one number below which advertising costs more than it brings in.
- Shopify Fees CalculatorPick your plan and country to see what Shopify Payments actually takes from each order, what that adds up to monthly, and your effective fee rate once the subscription is counted..
Last updated August 10, 2026