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They are right it just mean cost prior to shipping to get it to the final destination - Free on board:

A trade term requiring the seller to deliver goods on board a vessel designated by the buyer. The seller fulfills its obligations to deliver when the goods have passed over the ship's rail.

When used in trade terms, the word "free" means the seller has an obligation to deliver goods to a named place for transfer to a carrier.

Investopedia explains Free On Board - FOB
Contracts involving international transportation often contain abbreviated trade terms that describe matters such as the time and place of delivery and payment, when the risk of loss shifts from the seller to the buyer, as well as who pays the costs of freight and insurance.

The most commonly known trade terms are Incoterms, which are published by the International Chamber of Commerce. These are often identical in form to domestic terms, such as the American Uniform Commercial Code, but have different meanings. As a result, parties to a contract must expressly indicate the governing law of their terms.

It's important to realize that because this is a legal term, its exact definition is much more complicated and differs by country. It is suggested that you contact an international trade lawyer before using any trade term.

This pricing term indicates that the cost of the goods, including all transportation and insurance costs from the manufacturer to the port of departure, as well as the costs of loading the vessel are readfiled in the quoted price.This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that point. The FOB term requires the seller to clear the goods for export.

Hi DayDreamer,

Here's  the formula  and how to calculate fob price

http://www.exportarya.com/calcular-precio-fob.asp?id_idioma=3