Adding Labor Cost to Bill of Materials

I'd like to help with your question about the impact of service items when building assemblies, dpic44.

This only happens when you check the box for This service is used in assemblies or is performed by a subcontractor or partner when setting up the service item.

When that happens, you will be asked to select an expense account that will used for paying the vendor. This means that you're paying someone to perform the task to build the assembly. 

One the assembly is done, QuickBooks will also post the amount in the Credit column. This will also show a negative amount in your Profit and Loss report for the expense account. To zero it out or and to offset the credit, use the same expense account when paying the vendor (check or bill). 

I'd also recommend reaching out to your accountant for further advice on this matter. More details about inventory tracking in QuickBooks are also discussed here: 

• Track The Products You Manufacture
• Understand Inventory Assets And Cost Of Goods Sold Tracking

I'd also like to share a couple more articles with you for additional references when working in the program: 

• Customize Item Reports 
• Year-end Guide For QuickBooks Desktop 

Don't hesitate to get back here and post your follow-up questions if you still need more help with this. The Community is always ready to assist and guide you again. 

Appreciate the update, @dpic44.

With advanced inventory tracking, using an expense account to a service item for the bill of material will post the amount as part of the money-out entries. This is the reason why it is reporting the amount under the Credits column of your Profit and Loss report.

Therefore, I'd suggest contacting your accountant for guidance in choosing the account of your service item. Use this link if you haven't found someone you can work with: QuickBooks Certified ProAdvisor.

I'm adding this article to skip manual tracking and focus on making your products with a personal touch: Track the Products you Manufacture in QuickBooks Enterprise Suite.

It'll always be my pleasure to help if you've got additional questions about building assemblies. Use the Reply option below and surely I'll be here ready to assist you. Take care and stay safe!

Thanks for your reply and suggestions.

Is there an article about service items in builds?  This sounds like a simple question.  I just need the right account to charge it to.

Hello, dpic44.

Let me join the conversation and share some resources about everything you need to manage the products/service items you build in QuickBooks Desktop:

• Add, edit, and delete items.
• Create, build, and work with inventory assembly items.
• Combine your inventory items to build finished goods.

I also recommend seeking expert advice from an accountant to ensure your books will be accurate. They can guide you on what account to use for proper recording.

I'm always around to provide additional support if you have further questions about inventory items, @dpic44. Take care. 

Hi, thank you for the additional information.  I saw something about making other charges or fees in a build an "other charge" item type. I did that and changed one build and it reduced purchases by that amount when the item was sold.  Am I on the right track?  I initially thought it had to hit a GL account but this makes more sense to me, however it reduces COGS for that period.  I would have thought it would increase COGS.

• If you include other charges or fees in each build, set them up as other charge items.

Allow me to share with you some information on how the Cost of Goods Sold (COGS) account works in QuickBooks Desktop(QBDT), dpic44.

When you track inventory in QuickBooks, you'll need to understand how QuickBooks handles its inventory assets, to average cost and Cost of Goods Sold (COGS).

Costs of Goods Sold (COGS), tracks all of the costs associated with the items you sell, which allows you to calculate gross profits accurately. You then assign the necessary inventory items to these accounts so that you can accurately track what you have in stock, and know exactly how much you've spent and earned with it.  

I'll be adding this article to learn more about how the cost of goods sold works in QuickBooks Desktop: How Inventory Assets and COGS work in QBO?.

Stay in touch if you have additional questions about inventory in QuickBooks. I'm always around to answer them. Have a good one.

Thanks but I'm not using QBO, we have Enterprise.  And I understand what QB does to track costs.  I just had one cost causing issues.  And that's probably because I set it up as a service, which I got from one of QB's knowledge base articles.  What I'm seeing now is that it should have been set up as an "other costs" item type,

I'll have to play with it in a test file and track one item from raw material, build and sale.

Thank you to all! I'll update this once I have a definitive answer on what the fix was.

Thanks JenoP!

That's how we had it set up when the labor was performed by an outside contractor.  Now that it is done by an employee it became an issue showing a negative balance in the account.  I'm going to play around with a copy of the file to see how your solution works and let you know what happens.