Building assemblies affects COGS??


M

MacroMan

I just looked at my P&L by class and found some of my COGS sitting in a
different class than the rest of it. I double clicked on the COGS in
the wrong class to drill down and found that the source transactions
were Assembly builds. I can't figure out why. I assume that only
Inventory should be affected by a Build, and even then, only shifted to
one item from others. How could an assembly build possibly be affecting
COGS? (or Class, for that matter, since there is no class assigned to
the Inventory from which COGS would be drawn until one is indicated on
the sales form)
(Using Enterprise 5.0 Mfg& WS edition) Any ideas?

Then, when I deleted the build and replaced it with another, the COGS
effect was maginfied to 5 times the size it was with the original
build.

Clues?

Craig
 
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K

Karl Irvin

This is no help but the 2005 sample manufacturing company also does this. It
puts debits or credits in the "materials" expense account on some Assembly
Builds. See builds on 11/01/07, 11/20/07 and 12/21/07.

I can't tell why it does this as there is no way to drill down to the
calculation of the amount put into the materials expense account.
 
K

Karl Irvin

Well I see now. At the time of the Build, if the assembled part has a
negative quantity, the ave cost of the negative qty assembled part is the
ave cost that gets added to the assembly on a new assembly build. Any
difference is charged/credited to cost of goods sold.

See the sample manufacturing company Inventory Valuation Detail report for

Assembly part 1500-PM

On 12/01/07 an invoice is issued and the Assembly goes negative 1 with an
ave cost of 1,750.94

On 12/21/07 assembly build adds one new part at ave cost of 1,750.94

Actual cost of parts used in the 12/21/07 assembly is 1,936.79

But the Assembly Build only adds 1,750.94 to inventory and the diff of
185.85 is added to "materials cost" as COGS account.
 
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Thank you Karl Irvin!

This has been a complete puzzle to me in auditing our inventory accounting processes in QB.
Cost of Goods has NOT been affected when an invoice was entered, nor has Finished Goods Inventory been credited with the sale. Both of these GL accounts HAVE been affected when entering Build Assemblies - a completely incorrect accounting procedure. QuickBooks has confused me, and no one has been able to answer the question. All the setup in QB appeared correct.

You just answered it, with a forum post from 12 years ago.

I checked some samples, and yes, the Qty on hand WAS Negative when the builds were posted. It makes sense now - at the time the items were invoiced (sold), QB was unable to debit COGS and credit Finished Goods Inventory because there was no finished goods inventory to sell.

So QuickBooks was behaving in a "drop back and punt" manner - enter the debit to COGS and the credit to Finished Goods inventory when the inventory assemblies were built. The mystery is solved.

We manufacture with Lean Manufacturing style, and don't build items to have a large inventory. We mostly schedule our production to meet the demand of what has been ordered. I hope Karl's discovery helps other manufacturers who build to lean standards.

Miriah Stuart
Portland, Oregon
 

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