CPIM Practice Exam

Which of the following best describes 'landed cost'?

1. Only the retail price of a product

2. The product cost plus logistics costs

3. The total cost incurred by a consumer

4. Only the transportation cost of goods

The correct answer is: The product cost plus logistics costs

Landed cost represents the total expense of a product once it has arrived at the buyer's doorstep, including various elements that contribute to its final price. This measurement encompasses not just the product's purchase price but also all associated logistics costs, such as shipping, customs duties, taxes, and insurance. Understanding landed cost is crucial for businesses, as it provides a comprehensive view of the actual cost of acquiring goods, allowing for better decision-making when it comes to pricing strategies and supply chain management. In contrast, focusing solely on the retail price, transportation costs, or costs incurred by the consumer does not provide the complete picture needed for effective cost analysis and pricing strategy development. Thus, recognizing that the landed cost involves both the product cost and logistics costs is vital for accurate financial assessments in supply chain operations.