Why Per-Unit Cost Matters
Whether you're selling on Amazon US, Amazon UK, eBay, Shopify, or wholesale — every pricing decision comes down to one question: what does this product actually cost me per unit?
Get this number right and you can set prices confidently, know your exact margin on every sale, and make informed decisions about which products to reorder and which to drop. Get it wrong and you'll either underprice (losing money) or overprice (losing sales), and you won't know which until it's too late.
The challenge with imported goods is that many of the costs — shipping, brokerage, port charges, delivery — apply to the entire shipment, not to individual units. You need a systematic way to allocate these shared costs to each product to arrive at a true per-unit cost.
The Basic Formula
Your true cost per unit is:
Cost per unit = (Product cost + Allocated shipping + Duty + VAT + Allocated fees) ÷ Number of units
For a single-product shipment, this is straightforward — divide the total landed cost by the number of units. But most importers ship multiple products in the same container or consolidation, which means you need to allocate shared costs fairly across different products.
Understanding Cost Allocation
Cost allocation is the process of distributing shared costs (like freight, brokerage, and delivery) across the individual products in a shipment. There are four common methods, and the right one depends on the type of cost and the nature of your products.
Method 1: Allocation by Value
How it works: Each product bears a share of the shared cost proportional to its value relative to the total shipment value.
Best for: Customs duties, insurance, and any cost calculated as a percentage of value.
Formula: Product's share = (Product value ÷ Total shipment value) × Shared cost
Example: A shipment worth $12,500 total contains Product A worth $7,500 and Product B worth $5,000. A $250 brokerage fee would be split: Product A pays $150 (60%), Product B pays $100 (40%).
Method 2: Allocation by Weight
How it works: Each product bears a share proportional to its weight.
Best for: Air freight (charged by weight) and any weight-based charges.
Formula: Product's share = (Product weight ÷ Total shipment weight) × Shared cost
Example: Total shipment weighs 500 kg. Product A weighs 350 kg, Product B weighs 150 kg. A $1,500 freight charge would be split: Product A pays $1,050 (70%), Product B pays $450 (30%).
Method 3: Allocation by Volume (CBM)
How it works: Each product bears a share proportional to the space it takes up, measured in cubic metres.
Best for: Sea freight (especially LCL, which is charged per CBM) and warehouse storage costs.
Formula: Product's share = (Product volume ÷ Total shipment volume) × Shared cost
Example: Total shipment is 4 CBM. Product A occupies 3 CBM, Product B occupies 1 CBM. A $1,000 freight charge would be split: Product A pays $750 (75%), Product B pays $250 (25%).
Method 4: Allocation by Units
How it works: Shared costs are split equally across all units regardless of value, weight, or size.
Best for: Fixed per-shipment costs where no other method is clearly more appropriate (e.g., documentation fees).
Formula: Product's share = (Number of units of product ÷ Total units in shipment) × Shared cost
Example: 1,000 total units — 600 of Product A, 400 of Product B. A $125 documentation fee would be split: Product A pays $75, Product B pays $50.
Choosing the Right Method
In practice, you'll often use different allocation methods for different cost components within the same shipment:
| Cost Component | Recommended Allocation Method |
|---|---|
| Sea freight (LCL) | By volume (CBM) |
| Sea freight (FCL) | By volume or value |
| Air freight | By chargeable weight |
| Customs duty | By value (it's already calculated per product) |
| Import VAT | By value (calculated on customs value + duty) |
| Insurance | By value |
| Brokerage fees | By value or equally |
| Port handling | By volume or equally |
| Local delivery | By volume or weight |
| Inspection fees | By product (if specific) or equally |
Worked Example: Three Products in One Shipment
Let's walk through a complete example. You're importing three products from China to the UK in a single LCL (less-than-container-load) sea freight shipment.
The Products
| Product A: Phone Cases | Product B: Bluetooth Speakers | Product C: USB Cables | |
|---|---|---|---|
| Quantity | 2,000 units | 500 units | 3,000 units |
| Unit price (FOB) | $1.00 | $10.50 | $0.45 |
| Total value | $2,000 | $5,250 | $1,350 |
| Weight | 60 kg | 200 kg | 90 kg |
| Volume | 0.5 CBM | 1.8 CBM | 0.7 CBM |
| HS code duty rate | 0% | 2% | 0% |
Total shipment: $8,600 value, 350 kg, 3.0 CBM
Shared Costs
| Shared Cost | Amount |
|---|---|
| Sea freight (LCL) | $600 |
| Cargo insurance | $45 |
| Customs brokerage | $120 |
| Port handling | $180 |
| Local delivery | $350 |
| Total shared costs | $1,295 |
Step 1: Allocate Freight by Volume
Total volume: 3.0 CBM
- Product A: 0.5 / 3.0 × $600 = $100.00
- Product B: 1.8 / 3.0 × $600 = $360.00
- Product C: 0.7 / 3.0 × $600 = $140.00
Step 2: Allocate Insurance by Value
Total value: $8,600
- Product A: $2,000 / $8,600 × $45 = $10.47
- Product B: $5,250 / $8,600 × $45 = $27.47
- Product C: $1,350 / $8,600 × $45 = $7.06
Step 3: Allocate Brokerage by Value
- Product A: $2,000 / $8,600 × $120 = $27.91
- Product B: $5,250 / $8,600 × $120 = $73.26
- Product C: $1,350 / $8,600 × $120 = $18.84
Step 4: Allocate Port Handling by Volume
- Product A: 0.5 / 3.0 × $180 = $30.00
- Product B: 1.8 / 3.0 × $180 = $108.00
- Product C: 0.7 / 3.0 × $180 = $42.00
Step 5: Allocate Local Delivery by Volume
- Product A: 0.5 / 3.0 × $350 = $58.33
- Product B: 1.8 / 3.0 × $350 = $210.00
- Product C: 0.7 / 3.0 × $350 = $81.67
Step 6: Calculate Duty
- Product A: $2,000 × 0% = $0.00
- Product B: ($5,250 + $360 + $27.47) × 2% = $112.75
- Product C: $1,350 × 0% = $0.00
Note: Duty is calculated on the CIF value (product cost + freight + insurance to UK border).
Step 7: Calculate Import VAT (20%)
Import VAT is charged on the customs value plus duty:
- Product A: ($2,000 + $100 + $10.47 + $0) × 20% = $422.09
- Product B: ($5,250 + $360 + $27.47 + $112.75) × 20% = $1,150.04
- Product C: ($1,350 + $140 + $7.06 + $0) × 20% = $299.41
Step 8: Calculate Total Landed Cost and Per-Unit Cost
| Product A | Product B | Product C | |
|---|---|---|---|
| Product cost | $2,000.00 | $5,250.00 | $1,350.00 |
| Freight | $100.00 | $360.00 | $140.00 |
| Insurance | $10.47 | $27.47 | $7.06 |
| Brokerage | $27.91 | $73.26 | $18.84 |
| Port handling | $30.00 | $108.00 | $42.00 |
| Local delivery | $58.33 | $210.00 | $81.67 |
| Duty | $0.00 | $112.75 | $0.00 |
| Import VAT | $422.09 | $1,150.04 | $299.41 |
| Total landed cost | $2,648.80 | $7,291.52 | $1,938.98 |
| Units | 2,000 | 500 | 3,000 |
| Cost per unit | $1.32 | $14.58 | $0.65 |
What This Tells Us
- Phone Cases: Invoice cost $1.00, landed cost $1.32 — a 32% increase. Zero duty helps, but freight and VAT still add up.
- Bluetooth Speakers: Invoice cost $10.50, landed cost $14.58 — a 38.9% increase. The speakers are bulky (1.8 CBM for 500 units), so they absorb a large share of volume-based costs.
- USB Cables: Invoice cost $0.45, landed cost $0.65 — a 44.4% increase. Low-value items are hit hardest in percentage terms because fixed costs represent a larger share.
Why Per-Unit Cost Matters for Marketplace Pricing
On platforms like Amazon, eBay, and Etsy, your pricing needs to cover:
- Landed cost per unit (your true cost)
- Platform fees (Amazon referral fee: 8-15%, FBA fulfilment: $2.50-6+ per unit)
- Advertising costs (PPC spend per unit sold)
- Returns and refunds (5-10% of sales)
- Your profit margin
If any of these layers is calculated on an incorrect cost base, your profitability analysis is wrong. Starting with an accurate per-unit landed cost is essential.
For the Bluetooth speakers at $14.58 landed cost, selling at $29.99 on Amazon:
- Amazon referral fee (15%): $4.50
- FBA fee: $4.25
- PPC cost per unit: $1.80
- Returns reserve (5%): $1.50
- Profit per unit: $3.36 (11.2% margin)
If you had calculated on the $10.50 invoice cost, you'd have thought your profit was $7.44 per unit (24.8% margin) — more than double the reality.
Calculate Your True Cost Per Unit Automatically
Manually allocating costs across products and shipments is tedious and error-prone. The Import Calculator on LandedCost.co handles the allocation automatically, and the Cost Allocation feature lets you set allocation rules and apply them consistently across all your shipments.
Getting your per-unit cost right is the foundation of profitable importing. Every other decision — pricing, product selection, supplier negotiation — flows from this number. Take the time to calculate it properly.
Further reading: Make sure you understand the full picture with our landed cost calculation guide, and don't overlook the 12 hidden import costs that eat into your profit margins.
Know your true landed cost
before you import
Calculate duty, shipping, FX rates, and Amazon fees in one place. See your real profit per unit before committing to a shipment.
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