Cost is a very important aspect in QuickBooks, especially in determining the cost of goods sold. Find out how using the “Cost” field in an assembly item can really cause problems…
When creating an assembly item, the QuickBooks user needs to understand the following:
- Assembly Items are completions of production. In other words, once you build an assembly item, its component parts are reduced by the quantity needed to create that assembly.
- Assembly Items do not work well when nested. If you have sub-assemblies within an assembly, a report will show how many sub-assemblies you need to build the final assembly, but not how much raw materials it takes to build the sub-assembly. In other words, it only will report one layer deep.
- The “Cost” field in assembly items can be very dangerous to use. The problem with using the “Cost” field in this item is that it remains static unless manually changed. What this means is that if the cost of your BOM raises or lowers, the cost of the assembled item will remain static unless the user also manually changes the cost in the “Cost” field to reflect the changes in the raw material costs. It is better to add a service or “Other” item to your BOM (at $1) that you can change on the fly by changing the quantity to be used as subcontractor costs. What the “Cost” field will do is adjust the asset value of that assembled item to reflect the additional cost by creating a JE to reflect the cost of the individual items and the difference in cost from the “Cost” field.
Please let me know if you have comments on this. Also, I would like to give special mention to Joe Woodard who authored the Attachment.