Which two steps must be completed to estimate landed costs?

To estimate landed costs accurately, one critical step is to allocate charges. This involves distributing various costs associated with acquiring a product—such as shipping, insurance, duties, and taxes—among the line items of the purchase order. Properly allocating these charges ensures that all associated costs are accurately reflected in the final landed cost of the items, which is paramount for effective cost management and pricing strategies.

The allocation of charges is essential because it allows organizations to determine the total cost of goods sold, understand profit margins, and make informed decisions regarding pricing and inventory management. This step directly ties into the broader objective of achieving comprehensive insights into the total cost structure related to procurement activities.

In contrast, preparing the Material Purchase Order Data process is a necessary step but is not directly related to estimating landed costs as it primarily focuses on the creation and management of purchase orders rather than cost allocation. Analyzing Landed Cost Reports, while important for reviewing and understanding costs after they have been calculated, follows after the charges have been allocated and does not contribute to the estimation process itself. Documenting Internal Transfer Orders is also relevant for inventory management but does not specifically pertain to the calculation of landed costs, which is focused on external procurement and associated charges.