USA Best Practice for Inventory Accounting

May 4, 2018
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United States
What is the best way to book COGS/inventory if we track by components? Say our product cost $100, currently our ERP system automatically moves $100 from inventory to Cogs when that product is sold. The $100 comes from the BOM cost our Ops team updates based on the most recent prices. So when a PO comes in with a component related to that BOM is gets booked to inventory(it automatically gets moved when a product is sold). Our Ops team does not want to keep track of small components( say a $2 screw). They want to book these $2 screws directly to COGS. The problem is if they do that, based on our automatic entries, COGS would get double counted for that $2 screw(booked at the time of the invoice for $2 screw, and when the product is sold the $100 gets moved to COGS which includes that $2 screw). Does any one have any suggestions on how to keep both teams happy and do proper accounting. We could switch to manual entries when a product is sold, but that is no ideal.


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