Update Item lets you change the cost of an item when changing its cost on a purchase.
If you say, Yes, to update the cost of the item, in this example changing from $2 to $3, this will change the Glass Decanter item, which will changed its Landed Cost to $3.30.
In turn, the Landed Built function will change the Landed Cost of Fruit Collection to include the $0.30, the 10% tariff for Glass Decanter, to show $7.29 on TLC Profit tab.