# About purchase proportional costing

## Learn how your purchase orders are factored into your material unit costs

### We'll cover:

When you create a new purchase order, the total shipping and discount paid on the expense are automatically proportioned to each material purchased.

This allows all unit costs in Craftybase to represent the "fully landed" unit cost for your inventory valuation and thus COGS calculations. Learn more about material costs here →

For example, suppose you have created a purchase containing 3 materials:

Material |
Quantity |
Total Cost |

Blue Ribbon | 1 spool | $10 |

Red Ribbon | 1 spool | $14 |

Green Ribbon | 1 spool | $12 |

Total | $36 |

The supplier has charged you a shipping amount of $10 to send these materials to you.

When you save the purchase, Craftybase will calculate how much of the $10 shipping charge should be applied to each material. We do this by calculating the percentage of each cost relative to the total amount paid.

### Shipping Calculation

**Shipping Allocation:**

- Blue Ribbon:

- Percentage of $10 in relation to the total cost ($36): approximately 27.77%
- Calculated shipping for Blue Ribbon: approximately $2.77
- Fully landed cost for Blue Ribbon: approximately $12.77

- Red Ribbon:

- Percentage of $14 in relation to the total cost ($36): approximately 38.88%
- Calculated shipping for Red Ribbon: approximately $3.88
- Fully landed cost for Red Ribbon: approximately $17.88

- Green Ribbon:

- Percentage of $12 in relation to the total cost ($36): approximately 33.33%
- Calculated shipping for Green Ribbon: approximately $3.33
- Fully landed cost for Green Ribbon: approximately $15.33

Taking a look at Blue Ribbon, we can see that $10 of $36 is approximately 27.77% of the total. Applying this percentage to the $10 results in approximately $2.77, which we then include as part of the material's fully landed cost.

Material |
Quantity |
Total Cost |
Shipping* |
Landed Cost* |

Blue Ribbon | 1 spool | $10 (27.77%) | ~$2.77 | ~$12.77 |

Red Ribbon | 1 spool | $14 (38.88%) | ~$3.88 | ~$17.88 |

Green Ribbon | 1 spool | $12 (33.33%) | ~$3.33 | ~$15.33 |

Total |
$36 |
$10 |
$46 |

** For this example, we are rounding all values to 2 decimal places for simplicity, however in reality, Craftybase will calculate this with much more accuracy (to 5 decimal places).*

Once each material's landed cost is calculated, this is then added to your stock adjustments and your real-time Actual Unit Cost of each material is recalculated to factor in the new amounts.

**Discount Calculation**

Craftybase also factors in discounts when calculating the fully landed cost. Here's an example of how discounts are broken down:

*Example Discount:*

Assuming a total discount of $5 is applied to the purchase.

**Discount Allocation:**

- Blue Ribbon:

- Percentage of $10 in relation to the total cost ($36): ~27.77%
- Calculated discount for Blue Ribbon: ~$1.39
- Fully landed cost for Blue Ribbon after discount: ~$11.38

- Red Ribbon:

- Percentage of $14 in relation to the total cost ($36): ~38.88%
- Calculated discount for Red Ribbon: ~$1.94
- Fully landed cost for Red Ribbon after discount: ~$15.94

- Green Ribbon:

- Percentage of $12 in relation to the total cost ($36): ~33.33%
- Calculated discount for Green Ribbon: ~$1.67
- Fully landed cost for Green Ribbon after discount: ~$13.66

Material |
Quantity |
Total Cost |
Shipping* |
Discount |
Landed Cost* |

Blue Ribbon | 1 spool | $10 | ~$2.77 | ~$1.39 | ~$12.77 |

Red Ribbon | 1 spool | $14 | ~$3.88 | ~$1.94 | ~$17.88 |

Green Ribbon | 1 spool | $12 | ~$3.33 | ~$1.67 | ~$15.33 |

Total |
$36 |
$10 |
$5 |
$46 |

By factoring in both shipping and discounts, Craftybase ensures that the unit costs accurately reflect the fully landed cost for each material, contributing to precise inventory valuation and COGS calculations.