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Community Contributor *

Exclude Raw Material cost from Finished item in Purchase Order.

In order to make a Finish Goods. First i have to order Raw Materials to make it. So i create a Purchase order for Raw Materials in QBO. Then i pay the bill which increase the QTY of particular Items(Raw material). Now i have enough Raw Materials available to make Finish Goods. I send this Raw items to Finish product making company. So i create another Purchase order for Finish Goods. In this Purchase order for each Finish product the unit cost i enter is the Total cost of making it. (Raw Material + Assembly cost). The reason for this is while selling this product, the entry in COGS account should go as total cost (Raw + Assembly). 

Now i will be paying the vendor only the assembly cost and not the raw materials cost. How can i put this in my finish Purchase Order so that the total cost of PO will be only the assembly cost and not RAW + Assembly.

2 Comments
Established Community Backer ***

Re: Exclude Raw Material cost from Finished item in Purchase Order.

it requires a work around

 

when you send inventory to the third party processor, use inventory adjust, set the adjusting account to a clearing expense account (create one if you need to)

 

when you get the bill from the third party processor

1. in the item details part list the finished inventory item, qty, and the total amount of the third party bill PLUS the amount in the clearing expense account

2.  move to the account details part of the bill, select the clearing expense account and enter that amount as a negative number (the balance in the clearing account)

 

the bill will now net to the original bill amount, pay the bill when ready.

 

Community Contributor *

Re: Exclude Raw Material cost from Finished item in Purchase Order.

Thank you for reply.

 

What we have done currently is that,

While creating Finish Purchase order we have added another line item "Exclude Raw Material" which we created as "Service" in product listing. We have checked this service as "I purchase this product/service from a vendor" and have set an expense account called as "Exclude Raw Material". In Purchase order we have set the amount in negative for it. This leads to the total payment to vendor is only the manufacturing cost. So what we have done is right or we need to make any modification. 

I was also looking for something called as "Vendor credit". Can Vendor credit be better solution to this problem. 
I have very less knowledge of Accounting. So i don't know where and what thing go. Any help would be helpful.