The examples below are original, illustrative planning scenarios. They are not supplier prices, platform fee schedules, tax advice or recommended margins. Use confirmed quotes, your actual account terms and the appropriate accounting/tax treatment for your business.
What belongs in a landed-cost estimate?
For this worksheet, landed cost means the product and applicable costs of getting it to the stock location you specify. Define that destination and record each cost once. A manufacturing quote that includes an item should not have the same item added again.
Consider goods, inbound freight, insurance, applicable import charges, clearance and delivery to that location. Identify costs paid elsewhere or still unknown. Have the relevant provider or adviser establish duties, taxes and their treatment for your actual product and destination; a generic percentage is not a substitute.
Here is an illustrative order of 300 garments, with all figures in US dollars:
Scroll sideways to view all columns →
| Item | Assumed amount |
|---|---|
| Garments: 300 × US$18 | US$5,400 |
| Inbound freight | US$600 |
| Insurance | US$60 |
| Illustrative nonrecoverable import/clearance costs | US$240 |
| Delivery to the chosen stock location | US$150 |
| Total | US$6,450 |
| Cost per garment, assuming all 300 are saleable | US$21.50 |
The US$240 is a scenario input, not a tax or duty estimate. The example assumes the listed costs are included in the chosen planning basis and no item is duplicated.
If fewer than 300 garments are usable, record the loss and recalculate cash committed per expected usable unit. That planning figure is not automatically the accounting value of the remaining inventory. Under IAS 2, inventory losses are recognised as an expense when they occur. Confirm the accounting rules that apply to your business rather than assigning every lost garment's cost to the remaining stock.
How are gross margin and markup different?
Gross margin compares gross profit with sales revenue. Markup compares the difference between price and product cost with product cost. They use different denominators.
Using a simplified US$50 sale and a US$21.50 product-cost basis:
- Gross profit before additional selling costs: US$28.50.
- Gross margin: US$28.50 ÷ US$50 = 57%.
- Markup on that cost basis: US$28.50 ÷ US$21.50 ≈ 132.6%.
This is a planning calculation using the stated cost basis, not a determination of your accounting cost of goods sold. Shopify’s profit-report documentation explains its gross-margin calculation and the importance of recorded product costs. Understand which costs your report includes before treating it as a complete profit statement.
What is left after the selling costs?
Contribution is revenue less the variable costs associated with the sale. It is the amount available to help cover fixed expenses and profit. OpenStax’s managerial accounting text explains that distinction.
Continuing the illustrative US$50 sale, assume no discount, no tax collected as revenue and no shipping revenue. This simplified model treats the allocated product cost as variable; separate any fixed costs when calculating formal contribution margin. Freight, for example, may be fixed per shipment. The selling-cost amounts are fictional inputs, not current platform rates.
Scroll sideways to view all columns →
| Item | Amount per sale |
|---|---|
| Revenue | US$50.00 |
| Product-cost basis from the example | −US$21.50 |
| Assumed platform/payment charges | −US$2.00 |
| Assumed creator commission | −US$5.00 |
| Outbound shipping paid by the brand | −US$4.00 |
| Fulfilment and outbound packaging | −US$1.50 |
| Expected incremental returns/loss allowance | −US$2.00 |
| Allocated variable acquisition cost | −US$6.00 |
| Estimated contribution | US$8.00 |
The assumed contribution is 16% of revenue. It is not net profit: fixed software, salaries, studio rent and other overhead have not been deducted.
Use a separate case for each channel. Some sales may have a creator commission and some may not. Fees can vary with market, account, payment method and programme. Check the terms applying to you rather than copying a universal Shopify or TikTok Shop percentage.
For returns, use an expected effect based on actual evidence where available. This simplified allowance represents additional expected loss/cost; it does not already subtract a refunded sale. In a model that separately adjusts revenue for refunds, do not charge the same refund again as a cost. Account for resale recovery and other return effects consistently.
What changes if you discount the garment?
Recalculate the entire case, especially charges linked to price. A discount removes revenue, but it may also alter fees or commissions. Holding every other variable constant is a sensitivity assumption, not a claim about the actual channel.
If the illustrative US$50 price falls to US$45 and all assumed costs remain unchanged, contribution falls from US$8 to US$3. That is 6.7% of the discounted revenue, rounded to one decimal place.
If acquisition cost rises from US$6 to US$9 as well, the same simplified case reaches zero contribution. This gives you two specific questions: can the product sustain the planned discount, and how much can you afford to acquire that sale?
Review a cautious case before agreeing a production order. It is more informative than a single optimistic selling price.
How much cash does the order require?
Per-sale contribution and production cash answer different questions. Producing 300 garments in the landed-cost example requires US$6,450 across the assumed payment stages, before development costs and other business expenses. Selling the garments happens later and is uncertain.
Record supplier deposits, balances, freight payments and any separate material purchase against their due milestones. Keep enough context to see whether a planned order prevents you funding fulfilment, marketing or the next product.
One-time development costs should remain visible. Decide how to handle them in your planning and accounting rather than spreading them across an assumed sales quantity without checking what happens if fewer units sell.
Start with one garment and two channel cases. Mark each input quoted, actual or assumed, then identify the input that most changes the decision. Frenzee is being built to connect those costs to the garment and its next steps. Get an invite. Chat and the workspace are coming soon.