Non-Inventory items and assemblies
Do not use a non-inventory item in an assembly build, it does not work the way QB help says it will. What will happen is that the cost you enter in the cost block on the non-inventory item will go to COGS immediately when the build is created. That is wrong the cost should be held in the cost of the build and not sent to COGS until the build is sold.
QB does not hold the value of a non-inventory item marked for resale as it should, so when you use it in a build there is no value to add to the cost of the build. So what QB does is take the amount you entered in the cost block of the non-inventory item and send it to COGS immediately.
Since you had an expense when you bought the non-inventory item, using the non-inventory item in a build, adds that expense again in COGS. Not only is doubling expenses, but COGS should not have an entry until the assembly is sold.
Correction
Charlie Russell said it worked for him (see the comments for this entry) so I went back experimenting. IF, the key word is IF, you or QB enters the cost of the non-inventory item in the cost block below the description block before using it in an assembly (building the assembly), then it will work. For some reason my version of QB will not make that entry when I buy a non-inventory item.
What I did notice though, was the assembly build is keeping average cost based upon the previous builds too, so if the earlier builds used the non-inv item without the cost block filled in, the average cost is wrong. When the cost block of the non-inv item is filled in it works as Charlie says and the average computed cost starts increasing.
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May 14th, 2008 at 2:36 pm
Jim, I’m not seeing it that way. I’m working with QB 2008, but it should be the same with your older version.
I set up a test company. I set up some inventory parts, a non-inventory part, and an inventory assembly that uses both.
I checked the box in the non-inventory part that says “this item is used in assemblies…” and assigned an expense account.
I received some inventory parts, and purchased a non-inventory part. I see my inventory asset account holding the parts, and the non-inventory part expense shows on the P&L.
I build the inventory assembly, and I see that the inventory asset increases by the proper amount (including the cost of the non-inventory part). I see that the non-inventory item’s EXPENSE account has been REDUCED by the cost of the parts used. So now the cost of that consumed non-inventory part is a part of my inventory asset, not an expense.
If I sell that inventory assembly, my inventory asset account is reduced by the cost of that assembly, and the cost of the assembly shows in COGS. This COGS adjustment (and the inventory asset adjustment) reflect the cost of the inventory parts and non-inventory parts.
I’m not an accountant, but that seems to be working the way I expect it to?
rustler Says:
May 15th, 2008 at 6:22 am
Charlie, I just tried it to see what happens, I never thought about the cost being removed, but it is not happening.
I did the non-inv item marked for resale, selected COGS as the expense account, bought 1 of the item. At that point I pulled a P&L, the cost of the purchase was in COGS.
I built an assembly which included the non-inv part, sold it, checked the P&L and the cost of the assembly was not removed.
So I looked over the item screen again and when I bought it QB did not fill in the cost block, so I entered the cost in the block and did it again - then it worked as you said.
What an interesting quirk! Thanks.
May 15th, 2008 at 12:58 pm
When you enter the bill for a non-inventory item, and you enter a cost for the item that differs from the cost in the item record, you will get a message box that says “You have changed the cost for: Widget. Do you want to update the item with the new cost?” However, you have the option of hiding this message, and if you do you won’t be asked this in the future. You can get this message back by resetting all your “one time messages”, but that brings back all of those messages. Most likely in your case you’ve selected to hide that message some time in the past. That would create this problem.
However, thinking about this, there still is a “gotcha” in here. I haven’t checked this, but based on what you are saying, I believe that when you manufacture the item it will be adjusting costs based on the current cost value, which might not be entirely accurate if you have varying costs. I’ve not checked that to see if it is true. If so, that would support your original contention that these kinds of things should be avoided (or, at least, used with care).
Regarding your average cost comment on earlier builds - hey, if you don’t have it set up properly and you had the wrong costs, don’t blame QB for not giving you the average cost you wanted! It can only work with the info the way you set it up…
rustler Says:
May 16th, 2008 at 5:32 am
I am more than familiar with GIGO (Garbage in Garbage out) so I do understand. Part of the problem is that my installation does not update that pesky cost block when I buy something, I have no idea why, it never has. It doesn’t do it for inventory items or for non-inventory items.
May 16th, 2008 at 8:09 pm
Try bringing back the one time messages (in a test copy of your company, if you wish) and then do the operation - you should see that message when you change a cost
May 16th, 2008 at 8:10 pm
And should we add “GIGO” along with “FIFO” and “LIFO”?
rustler Says:
May 17th, 2008 at 3:45 am
Actually I did the “bring back one time messages”some time ago when you first mentioned it on the forum, didn’t make a difference then, but I might try it again.