Addition of custom clearance expenses in product costing

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Nikhil Sharma (Querist)

06 December 2025 Hi,
XYZ ltd has import two product say A and B
Qty 2000, 2000, A In $7 and B In $13

But xyz has incurred 131000 In custom clearance expenses like CFS & shipping line Etc. Except duty.
Now question is: should expense 131k be divided qty wise like 131000/4000
Or whereas total cost of goods is $40k and 65% cost pertain to product B and rest 35% to product A, so In 131k should be allocate 65% to B, and 35% of 131k to product A as costing.

Pls suggest......

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

06 December 2025 The most appropriate method depends on the nature of the expenses and the company's accounting policy, but allocation by value is generally considered more accurate when the products have significantly different costs.
Since Product B has a much higher unit cost than Product A, allocating the 131,000 expense by value (65% to B, 35% to A) is more accurate and in line with accounting best practices. Allocation by quantity would understate the cost burden for the more expensive product and could distort inventory valuation and profit margins.

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