Business
Inventory Unit Economics Calculator
Calculate landed unit cost, unit contribution, gross margin, annual demand, revenue, landed product cost, carrying cost, shrinkage, and annual contribution. The custom unit-cost stack connects one sellable unit with the annual inventory economics.
Fully landed cost per unit-
Gross contribution per unit-
Gross margin on selling price-
Expected annual units sold-
Expected annual revenue-
Annual landed product cost-
Estimated annual carrying cost-
Estimated annual shrinkage cost-
Annual contribution after modeled inventory costs-
Decision view
Landed unit cost and annual contribution
Landed unit cost and annual contributionOne unit's landed-cost stack is connected to annual demand, carrying cost, shrinkage, and contribution.
Exact scenario comparisonSupplier price per unit changes while all other entered assumptions remain constant.
| Supplier price per unit | Fully landed cost per unit | Gross contribution per unit | Gross margin on selling price | Expected annual units sold | Expected annual revenue | Annual landed product cost | Estimated annual carrying cost | Estimated annual shrinkage cost | Annual contribution after modeled inventory costs |
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How to use Inventory Unit Economics Calculator
- Build landed unit cost from all acquisition charges that vary with the order.
- Use a representative order quantity and annual unit demand.
- Stress-test supplier price, freight, markdowns, stockouts, safety stock, and shrinkage before purchasing.
Calculator guide
Understanding Inventory Unit Economics Calculator
Inventory margin begins with fully landed cost rather than supplier price. Freight allocation, duty, handling, carrying cost, and shrinkage must remain visible before annual contribution is judged.
Calculation method
How the calculation works
Build landed unit cost from supplier price, allocated freight, duty, and handling; apply sales volume, carrying cost, and shrinkage to estimate annual inventory contribution. Allocate freight across order units, add duty and handling to supplier price, multiply unit economics by annual demand, then subtract carrying and shrinkage costs.
Purchase decision
Reconcile the unit before scaling the order
A small omitted cost becomes material across annual volume.
Worked situations
Practical examples
- A $1,200 freight bill over 1,000 units adds $1.20 per unit.
- A 5% duty on an $18 supplier price adds $0.90 per unit.
- Selling at $42 leaves unit contribution only after every landed-cost component is included.
Better inputs
Useful tips
- Use consistent currency and Incoterm responsibility.
- Measure carrying cost against average inventory, not annual purchases.
- Track markdowns and obsolescence separately when shrinkage is not a sufficient proxy.
Before relying on the result
Limitations and common mistakes
- Average inventory is approximated as half one replenishment order.
- Safety stock, seasonality, lead time, stockouts, markdowns, tax, financing, fixed overhead, and capacity are excluded.
- The model assumes one representative product and selling price.
Reference
Key terms
- Landed cost
- Supplier price plus allocated acquisition charges.
- Carrying rate
- Annual cost percentage applied to average inventory value.
- Shrinkage
- Modeled loss of landed inventory value.
- Contribution
- Revenue remaining after modeled product and inventory costs.
Important note
Calculated from the entered values using the displayed accounting method. Reconcile material decisions with source records and applicable accounting policy.
Frequently asked questions
Why divide freight by order quantity?
It converts order-level freight to the cost carried by one unit.
Is gross margin calculated on cost or selling price?
The displayed margin uses selling price as denominator.
Why use half an order as average inventory?
It is the simple sawtooth average when inventory falls evenly from one order quantity to zero.
Does contribution equal accounting profit?
No. Fixed overhead, tax, financing, and other business costs remain outside the model.