Managing Product Pricing with Landed Costs in Odoo 18

In international trade, the cost of a product is rarely just the purchase price on the invoice. You have Freight, Insurance, Customs Duties, and handling fees. If you ignore these, your profit margins are an illusion.

Odoo 18’s Landed Costs feature allows you to allocate these additional expenses to your inventory valuation, ensuring your "Cost Price" reflects reality. In this guide, we'll walk through a real-world scenario with Global Gadgets, an electronics importer, using both Average Cost (AVCO) and First-In-First-Out (FIFO) methods.

Step 1: Configuration

Before we begin, we must enable the feature. Go to Inventory > Configuration > Settings and check the box for Landed Costs.

Next, create a service product to represent the cost (e.g., "Air Freight").

• Product Type: Service
• Landed Cost: Check the box (in the Purchase tab)
• Split Method: Choose how you want to divide the cost.
  • Equal: Same cost per line item.
  • By Quantity: Proportional to units.
  • By Current Cost: Proportional to value (most common for duties).
  • By Weight/Volume: Best for freight charges.

Scenario 1: Average Costing (AVCO)

Global Gadgets buys 10 Smart Watches at $50 each. The product category is set to AVCO.

Result: Only the accounting value changes immediately. The $100 freight is distributed across the 10 units.
New Cost Price: ($500 + $100) / 10 = $60 per watch.

Scenario 2: FIFO (First-In, First-Out)

Now, let's look at FIFO, which is more time-sensitive. We trade Wireless Earbuds using FIFO valuation.

1. Purchase Batch A: 10 units @ $20. (Total: $200)
2. Landed Cost Batch A: Customs Duty $20.
   -> Batch A Cost Adjusted: $22/unit.

3. Purchase Batch B: 10 units @ $30. (Total: $300)
4. Landed Cost Batch B: Customs Duty $50.
   -> Batch B Cost Adjusted: $35/unit.

CURRENT STOCK: 20 Units.
Valuation: (10 * $22) + (10 * $35) = $570.
Avg Cost displayed on Product: ($220 + $350) / 20 = $28.50

The Critical FIFO Rule: When you sell items, Odoo takes them from Batch A first. The cost of goods sold (COGS) will be recorded at $22, preserving your accurate margin for that specific batch. Only after selling all 10 units of Batch A will the system start expensing Batch B at $35.

Conclusion

Whether you use AVCO or FIFO, Landed Costs are non-negotiable for importers. They transform your "purchase price" into a "true cost," enabling you to catch margin leaks before they drain your profitability. Odoo 18 automates this complex accounting, ensuring that every cent spent on logistics is accounted for in the final product value.