In this post about Assembly Items in QuickBooks you will learn:
- What are Assembly Items in QuickBooks?
- The basic flow used by QuickBooks for Assembly Items
- Using a Build of Materials in QuickBooks
- How Assembly Items appear in Inventory Reports
Assembly items in QuickBooks are a very useful feature if you use a small assembly process. This feature is available in both the Premier and Enterprise desktop editions of QuickBooks.
Even though this feature is not designed for a highly complex manufacturing process, the capabilities of assembly items in QuickBooks may surprise you.
What are Assembly Items
Assembly items are often called “kits”. If you create finished goods from raw materials, you can use the assembly process in QuickBooks. Here is an example:
We buy two wheels and a bike frame. These would be considered individual components or raw materials. In QuickBooks we would create an inventory part for wheels and another inventory part for the frame. Our inventory report would show that we have 2 wheels on hand and 1 frame.
We would like to build a bike and keep track of how many “finished” bikes we have in stock. We tell QuickBooks that we are going to create a new finished product called a “bike”. Each bike will consist of 2 wheels and 1 frame. QuickBooks will keep track of the quantity of raw materials we have on hand as well as finished goods.
The Assembly Process in QuickBooks
Buying Raw Materials
First, we enter a Purchase order to request a shipment from our supplier.
Once we receive the parts, our inventory report will show the raw materials that we have on hand. Our report now shows that we have 1 bike frame and 2 wheels. These raw materials are available to be “assembled” into a new finished product called a “bike”.
When our techs are ready to assemble the bike, we can tell QuickBooks we are “building a bike”. This process is referred to as a “Build Assembly”. Below is the Build Assembly Form in QuickBooks.
Building an Assembly in QuickBooks
After we enter the Build Assembly, QuickBooks will move the 2 wheels and 1 frame from raw materials (Inventory) to a new finished good (Assembly).
Inventory Value After a Build
Notice that when we bought the raw materials, the value of our inventory was $150. After we build the bike, the value of our inventory is still $150. QuickBooks simply moved the material from raw materials to finished goods.
Before the build, the Inventory Report showed 2 wheels and 1 frame. After we built the bike, our report shows 1 bike. The report no longer shows the 2 wheels or 1 frame in stock; those parts have been “Assembled” into our new bike.
Build of Materials in QuickBooks
The 2 wheels and 1 frame are referred to as a “Build of Materials”. This is also commonly called a “BOM”. When we create an Assembly Item in QuickBooks, we also enter the BOM components (see below). The screen below is for an “Assembled Bike”. We tell QuickBooks the items needed to create this finished product.
If you are setting up Assembly Items for the first time, we can import all the Build of Material components into QuickBooks. No need to spend hours hand entering, we can import the BOM’s from a spreadsheet into QuickBooks!
Printing a Build of Materials
After you have created an Assembly Item (in our example the finished bike), you can print a report showing the finished product and all its components (the 2 wheels and 1 frame). For more details on this, please see my blog Print a Build of Materials List in QuickBooks.
The report below shows very valuable information including on hand for each assembly as well as the build components at the bottom.
Selling Finished Goods
When selling the finished bike, we enter the Assembled Product as the item on a customer invoice. The individual components became part of this finished product when we did a build and do not need to be individually listed on the invoice when we sell the finished product. In our example, we are selling 2 wheels and 1 frame that is already part of the finished product.
Cost of Goods Sold for an Assembly Item
So how does cost of goods sold work with an assembled item? Let’s look more closely at our example. Below is a recap of our raw materials purchase:
Here is a recap after our build:
So when we sell the finished bike, what does QuickBooks use for the cost of goods sold amount? You guessed it…$150. Here is the journal QuickBooks created when we entered the invoice.
Inventory Report after the Sale
Our inventory report now show zero quantity for both raw and finished goods.
We decide to purchase the wheel frame from one supplier and the outer tire from another supplier. We will have our techs assemble new finished tires. We will create an assembly item for the tire.
Wheel Frame + Outer Tire = Finished Wheel
This Finished Wheel will be added to the bike assembly. So the Bike Assembly will a include another assembly. In our scenario, the Bike is the main assembly and the wheel assembly is considered a “sub-assembly”. We can also add labor (at a calculated rate), overhead and other charges.
Labor, Overhead and other charges can be added to a Build of Materials.
QuickBooks Enterprise can have up to 500 items in a Build of Materials. In addition, QuickBooks Enterprise will automatically build the sub-assemblies when the main assembly is being build.