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Freight-In: best way to flow through Inventory & Cogs.

We pay for freight in to our warehouse. The amounts are relatively small vs. our other shipping costs and we have been going directly to the P&L with the items historically, but below the line. I first want to a) make sure we move the costs above the line and b) if we don't simply charge in-period on the basis of materiality, develop a sound basis for expensing over time. I am currently thinking of using inventory turnover as a basis for this (on average 3 months). Our outside accountant proposed % of current month items shipped / inventory. Seems similar but different.


(Finance Director) |

Since you say your inbound freight costs are relatively low, I wouldn't worry about putting any more accuracy into your inventory/COGS. It doesn't seem to me that the accuracy will buy you anything. What I would do: make sure that your buyers are including freight costs in their purchase analysis. You may find some suppliers offer "free" or much lower cost freight than others, and you want to be sure you are making buying decisions on an apples-to-apples basis.


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