Bills of materials and production

# Bills of materials and production

Use this when you make things from other things you stock: chairs from wood, packs from loose items, food from ingredients. A bill of materials says what one batch takes. A production order uses it to turn parts into finished goods, and works out what each finished one cost.

Write the bill of materials

1. Open Bills of materials under Purchases and choose New bill of materials.
2. Choose the Finished item and type One batch makes. If one batch makes 1 table, type 1.
3. Under Parts and by-products, choose Add a line for each part. Pick Part (goes in) and give the quantity.
4. For a part that is wasted a little each time, type a Scrap percent. The order then takes that much extra from stock.
5. A By-product (comes out) is something else you get from the same work, such as offcuts. Give its Share of cost percent. That share of the cost goes to the by-product and the rest stays with the finished item.
6. Type Labour per batch (minutes) and Fixed extra cost per batch if they apply, then Save.

A part can itself have a bill of materials. It is then a sub-assembly: its own orders are listed on the main order, and a bill that would use itself, even through other bills, is refused.

What one batch costs shows the cost of the batch from today's stock costs. Show what is needed tells you what a quantity would take and whether you are Short by anything.

Make something with a production order

1. Open Production orders under Purchases, then New production order.
2. Choose the Bill of materials, type How many to make, and choose Take parts from and Put finished goods in.
3. Choose Make the order. It is planned. Nothing has moved yet.
4. When work begins, choose Start the order. It is now In progress.
5. When it is done, choose Finish the order. The screen offers what was planned. Change Actually used or made if the real figures were different, add Labour used (minutes), and give serial numbers of the finished goods if the item is tracked that way.
6. A planned order you no longer need can be cancelled with Cancel the order. Anything already taken from stock goes back.

Choose Print job card on an order to give the workshop a sheet with the parts and amounts for the workshop.

What it posts

• Parts leave stock for the account Work in progress.
• Labour and overhead are added to Work in progress and credited to Conversion costs absorbed.
• Finished goods (and by-products) come into stock at their full cost, and Work in progress is cleared.

When no order is in progress, Work in progress is zero. The value of stock always matches your inventory accounts, so the books stay in step.

When the parts leave stock

Choose Settings on the Production orders screen. When parts leave stock has two choices.

• When an order starts: parts go to Work in progress as soon as you start. Work in progress shows what is on the shop floor now.
• When an order is finished: nothing is posted until the order is finished. The Work in progress screen shows an estimate in between. This suits a shop that only looks at its books at month end.

The same page holds the Labour rate per hour and an overhead percentage added on top of the labour cost.

Worked example

A table takes 4 legs at 5 each and 1 top at 30, with 10% scrap on the top. Labour is 60 minutes at 12 an hour. Fixed extra cost is 8.

• Legs: 4 x 5 = 20
• Top with scrap: 1.1 x 30 = 33
• Labour: 12
• Extra: 8
• One table: 20 + 33 + 12 + 8 = 73

An order for 10 tables takes 40 legs and 11 tops, 600 minutes of labour and 80 of extra cost. Total 730. When you finish it, 10 tables come into stock at 730, 73 each.

What to watch for

• The cost is only as good as the cost of your parts. Keep purchases entered.
• Make the bill of materials before the order. An order uses a copy of the quantities, so later changes to the bill do not alter orders already made.
• If a part is short, the order can still be made. Look at Short by before you start.
• Switching a bill of materials off stops new orders. Old orders are untouched.
• Stock taken for an order cannot be sold meanwhile, but it still counts as yours: see the Work in progress report.