Any time you purchase goods that must be delivered to you through the mail or a delivery service (such as when you buy an item online), there could be a shipping & handling charge. This charge is meant to cover the packing and postage or shipping costs for getting the item to you.

There are a lot of different ways that merchants charge for shipping and handling. Some build the costs right into the price of the goods. Others charge a flat rate (one constant fee) for all purchases. Some use a formula that you can use to help predict the final cost of your purchase. This lesson will focus on this last type, where we use a formula.

When using a formula, there is frequently a minimum charge that is the least you will pay for shipping and handling on small orders. If the calculated shipping and handling charge of the order is below the minimum, then the shipping and handling charge will equal the minimum charge.

If the order is more than the minimum, a shipping and handling charge could be calculated as a percent of the total purchase price or the weight of the goods (weight is often used by delivery services and the U.S. Postal Service to determine their prices, but formulas on prices might be easier to manage by the merchant).

For example: Company ABC has a $2.00 minimum charge for shipping and handling, and a rate of 10% of the total order price.

If you make an order of $15, then the calculated charge is $15*0.10 = $1.50, but that is below the minimum of $2, so the shipping and handling charge will be $2.

If you make an order of $30, then the shipping and handling charge will be $30*0.10 = $3.