AboutLinda Saltz, CPA, QBalance.com Expertise QuickBooks best practices, troubleshooting, accounting, tax
We have over 70 pages of website content about QuickBooks tips,
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Experience Accountant and CPA over 20 years. Specializing in accounting software for over 12 years, Certified QuickBooks Pro Advisor, QuickBooks seminar instructor since 1997.
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Question We use QB 2007 Premier Manu & Wholesale Edition. When I enter an Inventory Assembly, I also enter a Cost which included the Materials and Labor. When we sell this item, QB uses the Average Cost as our cost basis on the P&L. My concern is I do not control this cost + it is lower than our actual cost. Is there a way to have QB use the cost we enter for an Assembly instead of the average cost it calculates?
Answer Hi Sandy,
No, the solution is to get your average cost per item corrected
To correct this for future builds go to reports > inventory reports > inventory valuation summary. Verify that your QTY and average cost for each inventory item and subassembly item is correct.
Make an adjustment to average cost from the vendors menu > inventory activities > adjust value & qty on hand > in the lower left of this window select "adjust value", enter a new correct value for the total qty you have in stock as of today. At the top of this window enter todays date and the account you want to post the adjustment to. I recommend adding a new account labeled "inventory adjustments (type = cost of goods sold). Save & Close.
Once your average cost per item is corrected and the actual finished cost is still higher due to labor & overhead costs, you can modify the bill of materials and add these items to each BOM.
For labor, set up a new service item labeled: (this is an example of one labor rate) you can have multiple items and select the best for each BOM
Labor - .25/minute ($15/hour)
make this item a 2 sided item (by checking the box "this item is used in assem..) and in the left side add the cost = .25 and for account type in Labor applied to inventory (add new account, type = cost of goods sold and make it a sub account of direct wages or labor) and on the right side code it to the most appropriate income account (most likely it will never appear on an invoice so it is really irrelevant which account you choose)
You can add another item for Supplies used in Inventory the same way you set up the Labor item
For example, lets assume that packaging is .30 per item
The item would be labeled
Supplies used Inv - .30
make this item a 2 sided item (by checking the box "this item is used in assem..) and in the left side add the cost = .30 and for account type in Supplies used Inv.(add new account, type = cost of goods sold and make it a sub account of Warehouse supplies) and on the right side code it to the most appropriate income account (most likely it will never appear on an invoice so it is really irrelevant which account you choose)
You would need a Supplies used item for each rate per item required for the Bill of Material. And you would need a labor item for each base rate per minute. For example maybe one class of employee receives $15/hour and another class of employee receives $35 per hour. Set up both Labor rates as service items and add to the appropriate BOM.
Let me know if you have questions,
Linda Saltz, CPA
Advanced Certified QuickBooks Advisor
www.qbalance.com
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