Experiment with the BOM Setup Options [Entry Tab]- "Explode Sub-Assemblies" check box to determine whether you want the sub-assembly parent or components of the sub-assembly to be brought into lines in the production entry by default.  Also check the box in the production entry itself.  

If you explode kit items, the kit components are consumed when shipped.  If you don't explode, Sage expects you to have pre-assembled the kits (BoM production).  There is also a separate option to print components for the BoM (which is logically different than exploding).  Know that these options only go one layer deep.  (Nested BoM with components which are Bills with other sub-components... require that the sub-assemblies are done separate from the SO / invoice).

Experimenting with these options in a test company (and reviewing the help file descriptions of each option) can help you understand how they work.