5 Easy Ways to Calculate Shipping Costs for Accurate Sales Estimations

Calculating shipping costs is rather uncomplicated. You can either perform the calculations manually or utilize tools such as online shipping cost calculators.

The majority of shipping companies, such as FedEx, offer shipping calculators on their websites. Nevertheless, it is advisable to conduct manual calculations and compare them with the results from online tools to ensure that no hidden costs are overlooked.

1. Basic Shipping Formula-Based Calculation

The Shipping Cost to Sales Ratio is calculated as Shipping Cost ÷ Total Sales.

This uncomplicated method reveals the proportion of your sales revenue that is allocated to shipping. For instance, if your sales for this month amount to \(12,000 and you spend \)1,200 on shipping, you calculate the ratio as follows: \(1,200 ÷ \)12,000 = 0.10, or 10%. Thus, for every dollar of sales, you are spending ten cents on shipping.

2. Order-Based Calculation

The Shipping Cost to Sales Ratio is calculated as Average Shipping Cost per Order ÷ Average Revenue per Order.

This approach compares the shipping costs with the revenue generated from each order. For example, if you had 150 orders in a month, with a total shipping cost of \(1,800 and total sales of \)27,000, you can calculate:

Average shipping cost per order: \(1,800 ÷ 150 = \)12

Average revenue per order: \(27,000 ÷ 150 = \)180

So, your shipping cost to sales ratio would be \(12 ÷ \)180 = 0.067, or 6.7%. This indicates that shipping costs account for approximately 6.7% of the revenue from each order.

3. Weight-Based Calculation

The Shipping Cost to Sales Ratio is calculated as Total Shipping Cost for Weighted Products ÷ Total Sales.

This method is particularly effective when your products have varying weights. For example, if the total shipping costs for products of different weights amount to \(400 and your overall sales are \)8,000, the calculation is:

Shipping cost to sales ratio: \(400 ÷ \)8,000 = 0.05, or 5%

Suppose you sold 80 units of a - 2-pound item at \(2 shipping per unit and 30 units of a 10-pound item at \)10 shipping per unit. Your total shipping cost would be (80 × \(2) + (30 × \)10) = \(400. With sales of \)8,000, your shipping cost-to-sales ratio would be \(400 ÷ \)8,000 = 0.05, or 5%.

4. Carrier-Based Calculation

This method focuses on the costs associated with different shipping carriers. For example, if you spent \(600 with Carrier A for local shipments and \)400 with Carrier B for international shipments, and your total sales were $9,000, you would calculate:

For Carrier A: \(600 ÷ \)9,000 = 0.067, or 6.7%

For Carrier B: \(400 ÷ \)9,000 = 0.044, or 4.4%

This allows you to determine which carrier is the most cost-effective for your diverse shipping requirements.

5. Dimensional-Based Calculation

The Shipping Cost to Sales Ratio is calculated as Total Shipping Cost Based on Dimensional Weight ÷ Total Sales.

Dimensional weight, also known as "dim weight," is used by shipping carriers to calculate costs based on the package size, not just its weight. To calculate dim weight, measure the dimensions of your package, calculate its volume, and divide by a standard dim divisor, which is typically provided by the carriers.

For example, if your shipping costs are calculated based on dimensional weight and you spent \(700 on shipping oversized packages for the month, with a total sales figure of \)8,000, the calculation would be:

Dimensional Weight Cost Ratio: \(700 ÷ \)8,000 = 0.0875, or 8.75%

This method helps you account for shipping costs that are influenced by the size of your packages, rather than just their weight.