more-arw search

Q&A Forum

My inventory value includes freight-in from China. We chose to air freight an inventory order. How should I record that extra-ordinary cost?

The products we sell usually arrive by ocean freight. The cost varies from delivery to delivery but it varies within a standard range. We do not use a perpetual inventory system. I keep track of the cost of goods available for sale and record COGS based on the average inventory value for each item. We made the decision to air freight product as a customer accommodation. The cost was rather enormous! That freight does represent the cost of those items available for sale but should (or could) that exception be handled differently?


Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

Yes. My view is that the excess cost of freight should not be part of regular COGS but as a separate line within COGS (so that your gross margin is still actual)-this is from a management reporting perspective, not GAAP. And I would track it under that customer so as to avoid distorting other customer profitability analyses.

(Manager of Admin and Operations) |

Thank you for your response. Good suggestion to track it to the particular customer.


Get Free Membership

By signing up, you will receive emails from Proformative regarding Proformative programs, events, community news and activity. You can withdraw your consent at any time. Contact Us.

Business Exchange

Browse the Business Exchange to find information, resources and peer reviews to help you select the right solution for your business.

Learn more

Contribute to Community

If you’re interested in learning more about contributing to your Proformative community, we have many ways for you to get involved. Please email to learn more about becoming a speaker or contributing to the blogs/Q&A Forum.