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Aaron B

Inventory Costing

Posted By

We purchase used equipment and refurbish them and then process them by physically cleaning them (labour), testing for faults (labour), and package each item individually in boxes (materials and labour). 

I understand according to accounting principles that all costs incurred to ready inventory for sale should be included in the cost of the inventory item.
What is the best way to include all these costs in each individual inventory item that we sell? 
Thank you
  • 0
    One option is to use a bill of material (BOM) and 2 items: one for the used equipment and another for the refurb equipment.
    The BOM will have the used equipment, labor(s) and materials as components. You will assemble the refurb item and that will add the cost of labor+materials.
  • 0 in reply to 49153

    I'm not sure I totally understand as I have no experience with the BOM module for Sage 300, so I'm sorry for asking for clarification.

    We purchase used equipment (ie. a computer) and then prepare it (labour + materials ex. cleaning and replacing parts) to get it into its final good condition for sale.

    I'm not sure what you mean when you say create two items, and I see a box for "Variable costs" in the BOM but what about adding labour as a components where I can change the number of unit hours, or is the most common way just to add it to "variable costs" and calculate the cost of labour myself.

  • 0 in reply to Aaron B
    Labor would be a non stock item in IC, you can have different labor codes for different hourly rates. Labor would then be added as a component and you can set the hours per labor rate.
  • 0 in reply to 49153
    Ok thanks,


    I'm assuming creating BOM's for each refurbished computer would be the best way to allocate our labour and material costs. The components of a typical BOM for a refurbished computer would be: the refurbished computer, 0.3 hours of labour @ 13$, 0.5 hours of labour @ $15, one cardboard box for packaging, windows 7 license.

    That is how a typical BOM for us would look like I believe.

    Here is my question:
    COGS will now include labour (an estimate of it), so when we post our total wage expense, we are now going to be double counting our cost of labour. What's the solution for this in Sage 300?
  • 0 in reply to Aaron B
    Speak to your accountant about dealing with COGS.
    When you assemble an item in IC it will debit inventory and credit something (payroll clearing account) with the labor cost. When you sell the item it will debit COGS (which includes labor) and credit inventory.
    So speak to the accountant and do some creative accounting.

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