Business Glossary
What Is Freight Cost Per Unit?
Freight cost per unit is the proportion of total shipping costs allocated to each product. For importers and distributors, accurately calculating this is essential — ignoring it leads to systematic understatement of direct costs and overstatement of gross margin.
The Formula
Freight Cost Per Unit = Total Freight Cost for Shipment ÷ Number of Units in Shipment
Worked Example — UK SME
A UK importer ships 2,000 units from China. Total freight (ocean, port handling, customs, domestic delivery): £3,840. Freight per unit = £1.92. If purchase price was £8.50, true direct cost is £10.42 — 22.6% higher than purchase price alone.
UK Benchmark
📊 For UK importers from China, freight typically adds 10–25% to the unit purchase price. Ocean freight rates are highly volatile — review landed costs quarterly and build a 5–10% freight buffer into pricing.
Common Questions
How do I allocate freight to products in a mixed shipment?
Allocate by weight or cubic metre depending on what determines the freight charge. For practical gross margin calculations, a simple unit count allocation works well enough.
Should I include domestic freight in unit cost?
Yes — if you offer free delivery or if delivery cost varies with each sale. Important for heavy or bulky goods where delivery cost is significant relative to product value.
How do I protect margins from freight volatility?
Include a freight buffer in pricing. Review landed costs quarterly. Consider freight surcharge mechanisms in major B2B contracts for significant shipment cost changes.
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