Freight Cost Per Unit Calculator

Why freight cost allocation matters for wholesale margins

For importers and distributors, freight is one of the largest cost components after the product itself, typically 5-15% of landed cost. If you do not allocate freight accurately to each SKU, your product-level margin analysis is unreliable. You might think a product is profitable when it is actually being subsidised by other products in the same shipment.

Freight cost per unit gives you the true cost to get each product from origin to your warehouse. This is essential for setting competitive prices, identifying which products are worth importing, and deciding between air and sea freight for different product lines.

Worked example: air vs sea freight for electronic components

A Sydney electronics distributor imports 2,000 LED driver units (product cost AU$18 each) from Shenzhen. They are comparing two freight options:

Sea freight saves AU$1.17 per unit (AU$2,350 total). But if the distributor is at risk of stocking out and lost sales during the 27 extra days of transit, air freight may be the better option. If these units sell at AU$32 each and daily demand is 50 units, 27 days of stockout represents AU$43,200 in lost revenue. The AU$2,350 air freight premium is trivial by comparison. The right choice depends on current inventory levels, not just the freight rate.

Freight allocation methods for mixed shipments

The simplest method is dividing total freight by total units. This works when all products in a shipment are similar size and weight. For mixed shipments, three alternatives:

• By weight: Allocate freight proportionally based on each product's weight. A 50kg pallet in a 500kg shipment gets 10% of the freight cost. Best when freight is priced primarily on weight (domestic road freight).
• By volume: Allocate based on each product's cubic volume. A 0.5 CBM product in a 5 CBM shipment gets 10%. Best when freight is priced on volume (LCL sea freight, air freight for bulky goods).
• Chargeable weight method: Use the greater of actual weight or volumetric weight (length x width x height / 5,000 for air, / 1,000 for sea). This mirrors how freight forwarders actually price shipments, making it the most accurate allocation for mixed loads. Use the CBM calculator to determine volumetric weight per product.

Common mistakes in freight cost allocation

Excluding ancillary charges. The freight forwarder's invoice typically includes more than the linehaul rate: origin handling, documentation fees, customs clearance, terminal handling charges, and fuel surcharges. If you allocate only the linehaul rate to products and book the rest to a general "freight" account, your per-unit cost is understated. Include all shipment-related charges in the allocation.

Allocating equally across dissimilar products. A shipment containing 100 units of a bulky outdoor fitting and 500 units of a small connector should not split freight evenly per unit. The fitting might occupy 80% of the container volume while representing only 17% of the unit count. Equal allocation inflates the connector's cost and understates the fitting's cost, distorting margin analysis for both.

Not reconciling freight invoices to POs. Freight invoices often arrive weeks after the goods, referencing a house bill of lading or booking number that does not appear on the supplier invoice or PO. If the AP team cannot match the freight cost to the correct purchase, it gets booked to a generic freight account and never allocated to products. Over a year, this can represent tens of thousands in unallocated freight that distorts your landed cost calculations.

How to use this calculator

1. Per Shipment mode: Enter total freight cost and number of units to get cost per unit. Add product cost, weight, and volume for additional metrics.
2. Comparison mode: Enter up to 3 freight options with cost, transit time, and units. The calculator shows cost per unit, cost per day, and highlights the best value.
3. Use the quick-fill presets for common shipment sizes (pallet, half container, 20ft container, 40ft container).

Frequently asked questions

Which freight allocation method should I use?

Use the chargeable weight method (the greater of actual weight or volumetric weight) for the most accurate allocation, because it mirrors how carriers price shipments. For single-product shipments, simple per-unit division is sufficient.

When does air freight make financial sense?

Air freight is justified when the product has a high value-to-weight ratio, when you are at risk of stocking out, or when the margin on the product absorbs the freight premium without affecting competitiveness. If freight per unit is under 5% of the selling price, the mode of transport is rarely the margin-deciding factor.

How does AP automation help with freight cost tracking?

Freight invoices arrive separately from supplier invoices and reference different document numbers. AP automation matches freight invoices to the relevant PO or shipment reference and allocates the cost correctly in your accounting system, giving you accurate landed cost and margin data per product without manual matching.