How exactly should the operating income from entrepot trade be calculated? Come and teach me quickly!
Solved#Entrepot trade#
I've just started dealing with entrepot trade business and don't quite understand the calculation of entrepot trade operating income. The entrepot trade process involves multiple links such as the purchase, transportation, and resale of goods, and each link may generate costs. I want to know what exactly should be used as the basis for calculating the operating income? Is it the final selling price of the goods, or the amount after deducting some intermediate costs? I hope everyone can explain it to me in detail, and it would be best to illustrate with some simple examples. Thank you!
Professional consultant answers
Andrew HuangYears of service：7Customer Rating：5.0
Supply chain optimization expertConsult
The operating income from entrepot trade is usually calculated based on the price difference of goods resale. That is, the operating income from entrepot trade = the income from reselling goods - the cost of purchasing goods. For example, Zhongshitong purchased 100 pieces of goods from a supplier in Country A at a price of $100 per piece and paid a purchase price of $10,000. Later, Zhongshitong resold this batch of goods to a customer in Country B at a selling price of $150 per piece and obtained an income of $15,000. Without considering other costs such as transportation and warehousing, the operating income from this entrepot trade is $15,000 - $10,000 = $5,000. However, in actual business, if there are intermediate costs such as transportation fees of $1,000 and warehousing fees of $500, whether to deduct these costs in the calculation depends on the company's financial accounting method. Generally speaking, if these costs are directly and closely related to the entrepot trade business, they will be deducted from the income to calculate a more accurate business profit.
In short, to understand the operating income from entrepot trade, the key is to clearly define the boundaries of income and cost and grasp the core of the resale price difference.
David LiYears of service：6Customer Rating：5.0
Senior customs declaration consultantConsult
When calculating the operating income from entrepot trade, the purchase cost is the basis. The money spent on purchasing goods must be calculated clearly, and then look at the selling price. The price difference is the preliminary income. Costs such as import duties, if incurred for the entrepot trade, also need to be considered and may affect the final income calculation.
Sarah ZhangYears of service：8Customer Rating：5.0
Document expertConsult
Sometimes, entrepot trade involves exchange rate fluctuations. For example, if the exchange rates at the time of purchase and sale are different, this will affect the income calculation. If the purchase payment is settled in the currency of the purchasing country and the sales payment is settled in the currency of the selling country, the price difference needs to be calculated after conversion according to the exchange rate at that time to determine the operating income.
Jennifer WangYears of service：4Customer Rating：5.0
Market development consultantConsult
Attention should also be paid to the contract terms. If the contract stipulates a special way of cost bearing, such as one party bearing the insurance premium during transportation, this must be based on the contract when calculating the operating income to see whether these costs should be deducted from the income.
Elizabeth LiYears of service：3Customer Rating：5.0
Compliance and risk managerConsult
When calculating the operating income from entrepot trade, for some small miscellaneous fees, if they have little impact on the overall amount, they can be not deducted separately for the sake of simplifying the accounting. But large intermediate costs, such as high transportation fees, must be taken into account.
James LiuYears of service：10Customer Rating：5.0
Foreign trade tax refund consultantConsult
If there is a loss of goods in entrepot trade, the cost corresponding to this part of the loss should be deducted from the income. For example, if 100 pieces of goods are purchased and only 95 pieces are left for resale, the cost of the 5 pieces of goods must be counted in, affecting the operating income.
Joseph ZhouYears of service：10Customer Rating：5.0
Senior foreign trade managerConsult
If the entrepot trade involves commission expenses, such as paying a commission to an intermediary who facilitates the transaction, this commission must be subtracted from the income to calculate the actual operating income.
Robert ChenYears of service：6Customer Rating：5.0
Customer service consultantConsult
The length of warehousing time will also affect the cost. Long - term warehousing will increase the warehousing fees, and these fees need to be considered when calculating the operating income to see if they need to be deducted from the income.
Amanda YangYears of service：3Customer Rating：5.0
Cost control consultantConsult
Different transportation methods result in large cost differences. Air transportation has a high cost, while sea transportation is relatively low. Different transportation costs will affect the calculation of the operating income from entrepot trade, and the impact on income should also be considered when choosing a transportation method.