Module 1.3 Costing Types and Costing Methods - OC 96368 NQF5 June 2022

❖ CLEARING
❖ FORWARDING
❖ CUSTOMS ESSENTIALS

Occupational Certificate | 96368 – Clearing & Forwarding Agent | NQF 5

Module 1.3

FREIGHT COSTING

Welcome to your

Freight Costing

Module! 2

Lesson Components

This Module has been split into 2 specific components:

A. The KNOWLEDGE Component referring to a theoretical application, and

B. The PRACTICAL Component referring to a practical application, which will
form part of your Formative Assessment (FA) and your Workplace Evidence
(WPE), contributing to your overall Portfolio of Evidence (POE)

NOTE:
• The Knowledge Component has been designed to share specific information

with the student as required by the SAQA Unit Standard Outcomes
• The Practical Component has been designed to encourage students to recall,

apply and design (simulate), or overcome new challenges either through
specific tasks, or practical scenarios / case studies (assimilate)
• The R.A.I. Principle, Recall, Assess & Insight which is key to learning, understanding
and application, has been applied to offer simulated / kinesthetic learning

3

Introduction (about this Module)

In this specific Module students will be introduced to essential
information and knowledge components pertaining to, (a)
Estimated Landed Costing for Procurement Purposes, (b)
identifying the various cost components within the supply
chain (viable & hidden costs), (c) understanding the various
types of costing encountered within the freight industry, (d)
how to assemble an imports and exports costing, and the
various methods to calculate unit costing.

Your next module will cover the ROLE PLAYERS within the
freight forwarding industry, including the various brokerage
services offered by Clearing & Forwarding (C&F) Agents.

4

Important Note about this Module

• Students have already been introduced to
the costing methodology pertaining to the
ICC Incoterms®, costing per transport leg
and associated Incoterms as discussed in
Module 1.2 – Procurement Essentials

• This module will concentrate on Freight
Costing (Type A – Product Costing)

• File Costing for Invoicing Purposes (Type B

Costing) will be discussed in detail in the

Finance Module. We will therefore give a

brief overview of the rationale pertaining

to file costing 5

Lesson Plan

A. KNOWLEDGE COMPONENT (THEORY):

(DURATION: 1 DAY)

Lessons Related Topics
1. The Rationale of Costing
 Why is Costing so Important?
2. Identify Costs within the  What if…
Supply Chain  Getting it Right First Time!
3. Types of Costing
 The International Logistics Chain (FRT FWD)
4. Examples of Estimated  Cost Components per Transport Event
Costing (Imports | Exports)
5. Methods of Unit Costing  Type A – Product Costing
 Type B – File Costing for Invoicing Purposes
6
 Imports Procurement Costing
 Exports Sales Costing

 KG-KG (Mass or Same Unit Measure)
 Value-Value (Value Basis)
 KG-Value (Mixed Goods)

Lesson Plan Continued…

DISCUSSION POINTS

Within your lesson you might encounter some discussion points.

These have been devised either to encourage a discussion (insight), or recall
information from the lesson, but also to identify, comment, or present an
argument about that specific point (Let’s have some fun!)

Lessons Specific Discussion Points
 Does Export / Import Value-Added-Tax (VAT) or
1. The Rationale of
Costing General Sales Tax (GST) Feature in Costing?
 What would happen if a cost has been
2. Identify Costs within
the Supply Chain omitted?

5. Methods of Unit  Why is it so important to do unit costing?
Costing

7

Lesson Plan Continued…

B. PRACTICAL MODULE (R.A.I. PRINCIPLE = RECALL | ASSESS | INSIGHT)

(DURATION: 1 DAY)

• You will be required to complete 2 Ocean Freight Imports Cost Estimates for
Procurement Purposes:
1. Lesson 1, a Cost Estimate for FCL Cargo, and
2. Lesson 2, a Cost Estimate for LCL Cargo

• The Procurement Officer is required to calculate an estimated landed cost, up
to receiving goods into his stores.

• Templates will be provided

The Practical Module is all about simulation, application and gaining knowledge,

but above all, learning whilst having fun also!

8

Assessment Requirements

PRACTICAL APPLICATIONS (ACTIVITIES | SIMULATIONS | WORKSHEETS)

• All practical activities conducted within the Practical Application classes must be
conducted, kept neat and to be presented as part of your Formative Assessment

• You may remediate any mistakes made on your part prior to presenting such
practical activities.

• You MUST keep copies of all your practical activities please

FORMATIVE ASSESSMENTS

• You must present your practical activities as part of your Formative Assessment,
however, in addition, you may be required to complete a Q&A assessment also

SUMMATIVE ASSESSMENTS

• You will be required to complete a Summative Assessment (Knowledge
Questionnaire) at the end of each Module (not per sub-module).

• Dates and specific times will be shared with you

• Some of these may comprise of a Q&A or practical simulation 9

Portfolio of Evidence (POE)

• You will be required to complete 2 shipment files:

1. One for an Importation, &
2. A second for an Exportation

PLEASE NOTE (important):

• Part of your POE will be conducted within the practical application
component, done so by means of your practical activities via your FAs, which
will allow you to “build” and complete one shipment file, as you work your
way up to completing this training programme,

• You will be required to “build” your second file in a similar manner, but by
yourself in order to present to the Assessor your ability to do so, your insights
and any other creativeness to do so.

10

Clearing &
Forwarding Agent

Occupational Certificate | 96368 | NQF 5

Module 1.3

Knowledge Component

FREIGHT COSTING

Module 1.3

Freight Costing

Lesson 1
THE RATIONALE OF COSTING

 Why is Costing so Important? DISCUSS:
 What if… Does Export / Import Value-Added-
 Getting it Right First Time! Tax (VAT) or General Sales Tax (GST)

Feature in Costing?

12

The Rationale of Costing

WHY IS COSTING SO IMPORTANT?

• It is all about SALES vs. PROFIT and curbing potential losses
• It is all about covering visible costs (what we see) and invisible costs (what we

don’t see and rely on a 3rd Party to highlight such) up to a landed cost
• It allows the Trader (Importer / Exporter / Middleman or Trading House) to

establish a price on the goods being traded with
• It could be for procurement purposes by an Importer
• It could be for on-selling by a Middleman or Trading House, i.e. good sold in

transit or goods sold on the high seas
• It aids in establishing payment terms / documentary credits (Letters of Credit)
• It is all about establishing a long-term relationship / partnership built on trust

between the Buyer and Seller

13

The Rationale of Costing

WHAT IF…?

• Do a proper estimation (landed cost) Inaccurate Costing could close your
• Be clear about your requirements business even before you started trading

with your own customers!

• Ask about potential hidden costs

• Establish breakpoints, i.e. cost at origin (transport Leg 1), shipping costs

(Transport Leg 2) & delivery costs at destination, aka landside (Transport Leg 3)

• Make sure the Tariff Classification is correct! NB NB NB

• Check on duties and taxes (Origin & Destination)

• Get your Agent to go over the costing

• Always include a “cost-upliftment” factor, i.e. 10% on end cost

INACCURATE LANDED COSTING FROM THE POINT OF ORIGIN, WILL HAVE A HUGE
DRAWBACK ON THE LANDED COST AND THE END-VALUE (SALES VALUE) OF THE GOODS!

14

Getting it Right First Time!

WHY IS THE CUSTOMS TRILOGY & STATUTORY REQUIREMENTS SO

IMPORTANT?  CAN I IMPORT OR NOT? Investigate | Plan | Comply :
PRIOR to Procuring Goods
• The Customs Trilogy comprises of:

i) The Harmonized System (HS) Codified System for Tariff Classification (6 Rules vs. Tariff
Headings & Codes)

ii) Customs Valuation Methods (Customs Value for Duty Purposes based on 6 types of
Customs Values; Main Value = Transactional Value as per Supplier’s Commercial
Invoice)

iii) Rules or Origin (Most Favoured Nations, Trade Agreements & Preferential Rates of
Duty, Anti-dumping & Safeguard duties i.t.o. Schedule 2 of the Customs Act)

• Next, ITAC Imports & Exports Control Acts (Prohibited vs. Restricted Goods vs. Import
Permits)

• Also other statutory bodies, i.e. State Vet, Plant Inspector, Port Health, NRCS (SABS SANS

Codes), SAPS, Border Police 15

What About VAT or GST?

DISCUSS:
Does Export / Import Value-Added-Tax (VAT) or General Sales Tax

(GST) Feature in Costing?

THE SIMPLE ANSWER IS NO!

• VAT / GST is an internal tax related to that country’s internal revenue
• As such, VAT or GST is claimable / recovered from that country’s internal

Revenue Service (i.e. via a Vat Return document lodged with SARS in SA)
• Due to the above, VAT or GST does not add to the final bottom-line or cost-

value of the goods, especially for on-selling purposes

16

Module 1.3

Freight Costing

Lesson 2
IDENTIFY COSTS WITHIN
THE SUPPLY CHAIN

 The International Logistics Chain (FRT FWD)

 Cost Components per Transport Event

• Transport Leg 1 – Origin DISCUSS:
• Transport Leg 2 – International Carriage What would happen if a cost has
• Transport Leg 3 - Destination
been omitted?

17

The International Logistics Chain (FRT FWD)

18

Cost Components per Transport Event

TRANSPORT LEG 1 – ORIGIN (EXW TO FOB/FCA)

Ex-works / Ex-factory Value of Goods = FOB / FCA
+ Packaging & Handling Costs Value for

+ Pre-inspection Fees & Inspection Certificates & Permits Customs Value
+ Customs Clearing Costs (Pre-shipment / Exportation) & Agency Base
+ Customs Export Duties / Surcharges (Export Taxes Due Customs)
(VDP = Value
+ Equipment Placement Costs (Due Carrier) for Duty
+ Cartage / Transport / Carrier Haulage Costs Purposes)
+ Port THC / Airport Terminal / Depot Stuffing / Groupage Costs
19

Cost Components per Transport Event

TRANSPORT LEG 2 – INT. CARRIAGE (FOB/FCA TO CIF/CIP)

FOB/FCA Value of Goods (Placed on board Carrier) = CIF/CIP
+ Pre-Carriage (if from Inland Origin to POL) Value
+ Main Carriage (Int. Freight POL to POD)
(Value Base for
+ Freight Surcharges (BAF| CAF | Out-of-Gauge | Risk) Customs CIF &
+ On-Carriage (if from POD to Final Destination)
+ Other Security Surcharges (Due Carrier) C Value on
CCD SAD500)
+ Stevedoring / Ground Handling Agent / De-grouping Costs
20

Cost Components per Transport Event

TRANSPORT LEG 3 – DESTINATION (CIF/CIP TO DDP | STORES)

CIF/CIP Value of Goods (Delivered to POD / Final Destination) = DDP Value
+ Customs Clearing Admin Fees (Pre-arrival / Pre-importation) Taken into

+ Customs Duties & Related Surcharges (Dutiable Taxes) Stores for Unit
+ Equipment Release & Depot Turn-in Fees (Due Carrier) Cost
+ Port Cargo Dues (RSA Only on all exported / imported cargo)
+ Port THC / Airport Terminal / Depot Unpacking / De-groupage Fee Calculation
(Basis for
+ Cartage / Transport / Carrier Haulage Costs Import
+ Agency Fees (incl. Special Attendance) Costing)

21

Omitted Cost(s), What If…

DISCUSS:

What would happen if a cost has been omitted?

ANY OMITTED COSTS FROM THE ESTIMATE WILL BECOME A WRITE-OFF!

• Your estimated landed cost will be compromised,
• Your budget will be incorrect,
• Your on-sales value will end up as an “under-estimation”,
• Your profit will be wiped out, instead you will end up with a loss, and
• It will take time to recover a loss, or you might not be able to recover at all!

22

Module 1.3

Freight Costing

Lesson 3
TYPES OF COSTING

 Type A – Product Costing

• A.1 - Estimated Landed Cost (Procurement)
• A.2 - Importation Cost (aka the Loaded Cost)
• A.3 - Final Landed Cost (after FOREX)

 Type B – File Costing for Invoicing Purposes

23

Type A – Product Costing

A.1 – ESTIMATED LANDED COST FOR PROCUREMENT

• Procurement Costing done prior to establishing the Int. Contract of Sale (ICOS)
• Always broken down into the various Transport Legs and associated Incoterms
• Sometimes 2 estimates are requested:

i) From Supplier, mostly EXW to CIF / CIP
ii) From Agent, mostly EXW to CIF / CIP
• Reason, to compare costs to decide on better buying option
• Determine the best suited Incoterm for the ICOS
• Broken down into itemised costing for later comparison:
i) Compare with Importation Cost
ii) Compare with Final Landed Cost (after FOREX)
iii) Compare & establish cost variances between costs and within tolerance

24

Type A – Product Costing (Continued…)

A.2 – IMPORTATION COST

• Value Base = The Customs Value (aka VDP = Value for Duty Purposes)
• All costs per Transport Leg are in hand
• ROE (Rate of Exchange) based on SOB Date / Master Waybill Date
• To establish individual product cost in case of pre-determined sales
• Add profit margin onto individual product cost for sales purposes
• Always compared with quoted sales value based on estimate vs. actual cost
• Allows for adjustment on allowable tolerance due to uncontrolled costs

Cost Basis: Shipping: Landside: Landed Cost:
Customs VDP Carrier Costs Import Costs Into Stores

(Inv. Value + FOB Costs) (Freight + Marine Ins.) (Customs + Delivery) (Cost of Supply)

Transport Leg 1: Origin Transport Leg 2: Int. Transport Leg 3: Value Base per Unit for
Carriage Destination Sales Purpo25ses

Type A – Product Costing (Continued…)

A.3 – FINAL LANDED COST (AFTER FOREX PAYMENT)

• Value Base = Invoice Value after FOREX Payment (Against actual Bank Exchange Rate)
• Added costs include:

i) Freight Forwarder’s Cost (Transport Leg 1 – Origin)
ii) International Carrier’s Cost (Transport Leg 2 – International Carriage)
iii) Marines / Transport Insurance Cost (End-to-End or depending on cover range)
iv) Customs Broker / Clearing Agent’s Cost (Transport Leg 3 – Destination)

• Final Landed Cost is calculated & broken down into unit costs
• Unit costs are compared with:

i) Unit importation cost
ii) Unit sales value based on unit importation cost
iii) Margins are established for financial reporting (over / under recoveries for profits vs.

losses)

26

Type B – File Costing

COSTING FOR INVOICING PURPOSES

• Costs are gathered and arrange in order of event (Transport Legs 1 to 3):

i) Freight Forwarder’s Invoice converted into local currency (Transport Leg 1 – Origin)
ii) Carrier’s Invoice; main carriage + surcharges converted into local currency

(Transport Leg 2 – International Freight)
iii) Transport / Marine Insurer’s insurance premium converted into local currency (End-

to-End cover or limited cover per event / range)
iv) Customs Broker / Clearing Agent’s invoice; Customs duties & Vat + all related

charges up to final delivery (should already be in local currency)

• Costs are added and compared with supporting vouchers (invoices, shipping
instructions, waybills, clearing instructions, Customs clearing documentation and
final delivery instructions)

• Final Tax Invoice produced for payment by client

27

Module 1.3

Freight Costing

Lesson 4
EXAMPLES OF
ESTIMATED COSTING

 Imports Procurement Costing
 Exports Sales Costing

28

Example of Import Procurement Costing

Agency, Client, Supplier and Freight Details

From: To: NOTES:
• Assemble charges / cost on the
Pink Panther Freight African Steel Works
African Jungle Mall The Centre of Middelburg “Costing Estimate” Sheet.
• Show all charges for each
Johannesburg South Africa
specific transport leg / per
Estimate Covering: Ex Durban to Middleburg Incoterm.
Nett mass : 2500.00 KG • Ensure client knows this is an
2 x 6m FCL STC 20 Bundles of Steel Pipes Gross mass : 25500.00 KG estimate only and it is subject to
Ex Thyssen Staal, Hamburg - Germany change without prior notice due
200 Steel Pipes, dia 600mm x length 5.5m to fluctuation of rates of
Incoterm: EXW - Hamburg exchanges and other cost factors
beyond the Agent’s control.
Special instruction –
29
Client wants to see the cost in both the foreign Euro value and
the ZAR equivalent per freight leg / Incoterm, and
The Freight in Usd must be converted to Euro for costing purposes

Example of Import Procurement Costing

Forwarding Agent’s Costs – Freight Forwarding & Shipping (Int. FRT)

Charges at Origin – Transport Leg 1 (EXW to FOB) : Euro 375.00 per container

Port THC : Euro 65.00 per container
Equipment Release : Euro 75.00 per BOL
Bill of Lading Fee : Euro 450.00 per container
Cargo Wharf / Cranage Fee (lift charges) : Euro 995.00 per container
Container Haulage (Special Heavy Duty)

Carriage / Freight Charges – Transport Leg 2 (FOB to CFR)

Carriage (Ocean freight: USD 1166.66 @ ROE 2.1  USD to Euro →) : Euro 2,450.00 per container

BAF (USD 116.66 @ ROE 2.1  USD to Euro →) : Euro 245.00 per container

30

Example of Import Procurement Costing

Customs Broker / Clearing Agent’s Costs – POD to Final Place of Delivery

NOTE: The Customs VAT is included here for budgeting purposes only. The VAT component
will be removed by the Importer to calculate the estimated landed cost for procurement
purposes

RSA Landside Charges plus Clearing & Delivery – Transport Leg 3 (CFR to DDP)

THC : R 1,300.00 per container 31
CTO Fee per Container : R 85.00 per container
Cargo Dues : R 1,850.00 per container
Merchant Haul ex DBN to Middelburg : R 7,000.00 per container
Customs Duty : R 85,500.00
Customs VAT : R 64,500.00
Pink Panther Documentation : R 550.00
Pink Panther Disbursement Fee : R 12,500.00
Pink Panther Agency : R 6,300.00

Sample of Transport

& Other Costs

Estimated for

Procurement

Purposes

• Transport and other costs are
assembled per Transport Leg and
i.t.o. the Incoterms for each
transport leg (component)

• Note that each specific cost
item has been numbered as a
control measure to account for
every single cost

• NOTE, this in NOT a Landed
Estimated Cost as it does not
include the value of the goods.

32

Establishing the Estimated Landed Cost

OVERALL LANDED COST + UNIT COSTING

Establishing Overall Establishing Unit Cost
Cost per Transport per Transport Leg

Leg

Estimated Landed Cost Cost Analysis

ZAR Value per ZAR Unit %

Foreign Value R.O.E. ZAR Value Value per Increase
175,000.00 10.55 1,846,250.00
Transport Leg Transport Leg on EXW

Cost of Goods EXW Value = 1,846,250 9,231

+ Freight Forwarder & Overseas Charges 3,845.00 10.55 40,564.75 FOB / FCA Value = 1,886,815 9,434 102%

+ Carriage / Freight & Surcharges 5,390.00 10.55 56,864.50 CIF / CIP Value = 1,943,680 9,718 105%

+ RSA Landside Charges 189,820.00

Less VAT 64,500.00

Total Landed Cost = 2,068,999.25 DDP Value (Excl. VAT) = 2,069,000 10,345 112%

Insert Number of Units : 200

33

Example of an Exports Freight Forwarder's Cost Estimate (Generic - All M odes) Type of Estimate EXPORT
Estimate, PART 1 Reference No. M115-01-16
Dated 25/01/2016
• In this example the supplier
(exporter) was requested to Business Name Client Details
supply a quote (export cost Street Address MARINE ENGINEERING SUPPLIES S.A.
estimate) in a foreign value. Contact Person U-TURN ROAD, PORT OF CAPE TOWN, RSA
Contact Details MIKE BREAKER
• The Shipping Term (Incoterm) MOBILE 082 123457 | E-MAIL: MIKEB@MARINE_ENG_SUPPLIES.CO.ZA
requested was DPU.
Forwarding Information
• The costing methodology remains
the same, per transport leg, and Selling / Shipping Term Buyer Commodity Value of Goods Currency No. of Units
then adding the value of the
goods to establish the potential DPU NEWARK MARINE PROPS MARINE PROPSHAFTS 437,500.00 USD 2,500.00
sales value.
Mode of Transport Cargo No. of Weight Indicator Volume Volume C/Weight
• PART 1 is to establish all the Movement Packages Actual Weight Indicator
related costs for quotation SEA 18.00 N/A
purposes. FCL 1 X 6M 30,000.00 KG CBM
Country of Origin Contract In
POL Country of POD Final Destination Place (Y/N) Contract Details
ZA Destination
NO
CTN US NEWARK NEWARK N/A

Cost Elements (Description of Charges)

Transport Leg No. 1 - Forwarding (Origin) No. of Units Unit Cost Total ZAR Cost ROE Foreign Value

1 Handling & Packing 1.00 2575.00 2,575.00 14.5000 177.59

2 Carrier Equipment Release 1.00 395.00 395.00 14.5000 27.24

3 Delivery to POL 1.00 1450.00 1,450.00 14.5000 100.00

4 POL THC / Depot Charges 1.00 995.00 995.00 14.5000 68.62

5 Bill of Lading Fee 1.00 175.00 175.00 14.5000 12.07

6 Agency Fee 1.00 1895.00 1,895.00 14.5000 130.69

7 Disbursement Fee 15,590.00 2% 311.80 14.5000 21.50

Total Cost - Origin = 537.71

Transport Leg No. 2 - Carriage (Int. Freight) No. of Units Unit Cost Foreign Value

8 Ocean Freight 1.00 2995.00 2,995.00

9 BAF 1.00 300.00 300.00

Sub Total (CFR / CPT Cost) = 3,295.00
689.66
10 Marine Insurance 1 10000.00 10,000.00 14.500
3,984.66
Transport Leg No. 3 - Landing Costs (Dest.) Total Cost - Carriage (Int. Freight incl. CIF / CIP Cost) =
11 Port THC Foreign Value
12 Carrier Release Fee No. of Units Unit Cost Total Cost ROE
345.00
1.00 345.00 345.00 1.0000 75.00
-
1.00 75.00 75.00 1.0000

Total Cost - Destination = 420.00

Costs Brought Forward Foreign Values

Transport Leg No. 1 - Forwarding (Origin) 537.71

Transport Leg No. 2 - Carriage (International Freight up to CFR / CPT, Marine Insurance Excluded) 3,295.00 3,984.66
Transport Leg No. 2 - Carriage (International Freight up to CIF / CIP, Marine Insurance Included) 689.66

Transport Leg No. 3 - Landing Costs (Destination), Customs VAT Excluded 420.00

Total Estimated Forwarding Cost = 4,942.37

Value of Goods No. of Items Value Currency ROE Foreign Value 34

2,500.00 437,500.00 USD 1.0000 437,500.00

Total Estimated Landed Cost (DDP Value) = 442,442.37

Unit Value = 176.98

Exporter's Cost Estimate per ICC Incoterm

Example of an Exports Marine Engineering Supplies, U-turn Road, Port of Cape Town, S.A.

Estimate, PART 2 Prepared by MIKE BREAKER
Designation Marketing & Sales Manager
• PART 2 of the example looks Contact Details MOBILE 082 123457 | E-MAIL: MIKEB@MARINE_ENG_SUPPLIES.CO.ZA
at establishing the potential
Sales Value per transport leg Procurement Requirements
and associated Incoterm
Commodity MARINE PROPSHAFTS
• Breaking it down in this
fashion allows the Buyer Buyer MARINE PROPS
(Importer) to pinpoint the
best buying term when No. of Units Required 2,500.00
comparing his own imports
estimate as done by his own Cost per Unit 175.00 USD
agent
Total Foreign Value 437,500.00 USD
• It also allows the Buyer and
Seller to negotiate the Sales ROE 14.5000
Value and Sales Contract
(ICOS) ZAR Value 6,343,750.00

Suggested SupplyTerm DPU NEWARK

Shipping Details
Transport Mode SEA
FCL / LCL / Other FCL
No. of Packages 1
Other Requirements (FCL Carriage) 6m GP Containers

Freight Forwarder's Estimate

Freight Forwarder All Freight

Reference No. M115-01-16

Dated 25/01/2016

Total Estimated Forwarding Cost 4,942.37 USD

Sales Value = Cost Analysis Unit Value Increase Margin

FOB Cost 437,500.00 USD 175.00 100.0000%
537.71 USD
FOB Value = 175.22 100.1229%
438,037.71 USD
Freight Cost 3,295.00 USD 176.53 100.8760%

CFR / CPT Value = 441,332.71 USD 176.81 101.0337%
689.66 USD 176.98
Insurance Cost 35
442,022.37 USD
CIF / CIP Value = 420.00 USD 101.1297%

Destination Cost 442,442.37 USD

Sales Value =

Module 1.3

Freight Costing

Lesson 5
METHODS OF UNIT COSTING

 Defining Unit Costing Methods DISCUSS:
 KG-KG (Mass or Same Unit Measure) Why is it so important to do
 Value-Value (Value Basis)
 KG-Value (Mixed Goods) unit costing?

36

Defining Unit Costing Methods

Units of the same Units based on value only Mixed variety of units
measuring type

These refer to goods with These refer to goods These refer to mixed
unit measures such as shipped in the same goods shipped in the
kilograms, liters, pairs, shipment, normally of same shipment, raw
square meters & the like, high value, but not materials and high
mostly raw materials, not combined with high valued goods, but where
combined with other volume / weight goods freight needs to split
goods in the same such as raw materials, according to the item
shipment, where the where costs are factored that attracted the highest
costs are factored out on out on a value basis only chargeable freight cost,
a mass or measurement FT for Ocean, or W/M for
basis, i.e. KG-KG, based Air Freight and NOT
on the FT for Ocean, or according to value only
W/M for Air Freight
37

Example of Unit Costing KG-KG

GOODS NOT COMBINED WITH OTHER GOODS IN THE SAME SHIPMENT (i.e. RAW

MATERIALS)

Total Freight Payable (converted into ZAR) R 2500.00

Total No. of Units 100 items

Item 1 = 60 items, gross mass 300.00kg

Item 2 = 40 items, gross mass 250.00kg

Total Gross Mass (based on FT converted to kilograms) 550.00kg

Calculation

Step 1: Calculate UNIT Freight payable per Gross KG R 2500.00 ÷ 550kg = R 4.54545 per kg

Step 2: Calculate Freight payable for Item 1 R 4.54545 / kg x 300kg = R 1363.64 freight

Step 3: Calculate Freight payable for Item 2 R 4.54545 / kg x 250kg = R 1136.36 freight

Step 4: Reconcile 2 amounts to balance with total freight R 1363.64 + R 1136.36 = R 2500.00  YES

! What have you observed about the unit freight cost value ?

38

Example of Unit Costing Value-Value

HIGH-VALUED GOODS COMBINED IN THE SAME SHIPMENT

Total Freight Payable (converted into ZAR) R 25000.00 !

Total No. of Units 100 items Note the factor!
Always work on
Item 1 = 60 items, total Value R 55000.00 a minimum of 8-
decimals for this
Item 2 = 40 items, total Value R 35000.00 type of costing

Combined Invoice Value = R 90000.00

Total Sales Value (Value of Goods + Freight) = R 115000.00

Calculation

Step 1: Establish a Unit Cost Factor R 115000 ÷ R 90000 = 1.27777777

Step 2: Calculate the Total Sales Value for Item 1 R 55000.00 x 1.27777777 = R 70277.78
(1171.30 per unit)

Step 3: Calculate the Total Sales Value for Item 2 R 35000.00 x 1.27777777 = R 44722.22
(1118.06 per unit)

Step 4: Reconcile values to balances with Sales Value R 70277.78 + R 44722.22 = R 115000  YES

Step 5: Calculate the Freight Portion for Item 1 R 70277.78 – R 55000.00 = R 15277.78

Step 6: Calculate the Freight Portion for Item 2 R 44722.22 – R 35000.00 = R 9722.22 39

Example of Unit Costing KG-Value

MIXED GOODS, RAW MATERIALS & HIGH VALUE GOODS, COMBINED IN THE SAME SHIPMENT

Total Freight Payable (converted into ZAR) R 15 000.00

Item 1 = An X-ray Machine, total Value of R 1 250 000.00 with a FT of 1 500.kg (1.50t)

Item 2 = 24 pallets STC non-corrosive chemicals, total Value of R 500 000.00 with an FT of 20 000kg (20t)

Calculation

Step 1: Calculate to combined FT 1.50t + 20t = 21.5t

Step 2: Establish the freight unit cost per FT R 15 000.00 ÷ 21.5t = R 697.674419 per FT

Step 3: Calculate the total freight payable for the X-ray Machine R 697.674419 x 1.50t = R 1 046.51

Step 4: Calculate the total freight payable for the 24 pallets R 697.674419 x 20t = R 13 953.49
Step 5: Reconcile with the total freight payable (581.40 per pallet)
R 1 046.51 + R 13 953.49 = R 15 000.00

40

The Importance of Unit Costing

DISCUSS:

Why is it so important to do unit costing?

(1) TO ENSURE AN ACCURATE SPLIT OF COSTS, ESPECIALLY IF PART OF A MIXED
CONSIGNMENT, AND (2) ALLOWS FOR ANALYSIS AND POTENTIAL ADJUSTMENT!

• It is all about efficiency and effectiveness!

• Cost analysis per unit allows for adjustments in procurement, or specific costs
queries (i.e. hidden costs),

• It allows for establishing profit margin calculations i.t.o. on-selling, and

• The correct unit cost in a manufacturing concern is allocated to the correct

department 41

Your Turn!
Any

Questions?

42

Instructional & Presentation Design by End of this
Rialgo Barnard Lesson,
thank you!

Trust you have enjoyed your journey
with us.

Please feel free to contact us should
you have any queries.

Best Regards, the GMLS Team

Clearing &
Forwarding Agent

Occupational Certificate | 96368 | NQF 5

Module 1.3

Practical Component

FREIGHT COSTING

Module 1.3

Freight Costing

Lessons for…
PRACTICAL APPLICATION

 Imports FCL Landed Cost Estimate You have 1 (one) hour to
 Imports LCL Landed Cost Estimate complete each estimate

• Treat as Costing for Procurement Purposes 45

Lesson 1

FCL Import
Costing

46

Lesson 1: FCL Cost Estimate

PLEASE COMPLETE THE COSTING TEMPLATE AS PROVIDED.

Estimate & Client Details : Import
: M101-01-16 DD 01/01/2016
Type of Estimate
Reference No. & Date : GLOBAL IMPORTS
Client Details : DUZI AVENUE, KEMPTON PARK, JHB - RSA
Business Name : GEORGE KULU
Street Address : MOBILE 082 123457 | E-MAIL:
Contact Person
[email protected]
Contact Details

47

Lesson 1: FCL Cost Estimate (Continued)

Forwarding Information : EXW
Shipping Term : NO CONTRACT OF SALE IN PLACE
ICOS : METRIX EXPORTS
Supplier : D/T COMPUTERS
Commodity : EURO 385 000.00
Foreign Value of Goods : 10 000
No. of Units : SEA
Mode of Transport : 2 x 6m FCL
Cargo Movement : 100 000.00 KG
Actual Weight : 36.00 CBM
Volume : China
COO : POL SHANGHAI / POD DURBAN / FINAL DEST. JHB ZA 48
Routing

Lesson 1: FCL Cost Estimate (Continued)

Cost Elements (Description of Charges per Transport Leg)

Forwarding (Origin) Units Unit Cost
Handling & Packing 2.00 Euro 75.00
Euro 35.00
Carrier Equipment Release 2.00

Delivery to POL 2.00 Euro 375.00

POL THC / Depot Charges 2.00 Euro125.00
Euro 55.00
Admin / Documentation 1.00

Freight Forwarder's Fee 1.00 Euro 275.00

Carriage (Int. Freight) Units Unit Cost
Usd 2 400.00 + 240.00
Ocean Freight & BAF 2.00

Marine Insurance 1.00 Euro 135.00 49

Lesson 1: FCL Cost Estimate (Continued)

Cost Elements (Description of Charges per Transport Leg)

RSA Landing Costs Units Unit Cost
Customs Duty 1.00 65 000.00
1 850.00
POD Cargo Dues 2.00
895.00
POD THC / Depot Charges 2.00 125.00
1 450.00
Carrier Release Fee 2.00 2 750.00
295.00
Delivery Fee 2.00

Agency Fee 1.00

Admin / Documentation Fee 1.00

50