QuickBooks for Inventory Assembly Items can be difficult, but it is far from impossible. The trick to setting up your Inventory Assembly Items in QuickBooks is understanding how to translate what you buy into what you sell. This blog post and screen cast will show you how I do it using my Lemonade Stand example from my Bookkeeping Basics series. Once you have the numbers worked out, setting up the Inventory Assembly Items and building the assemblies in QuickBooks is actually very easy.
In my original web casts on Bookkeeping Basics which you can see in my Toolbox For Finance Blog I went over a simple example of a Lemonade Stand where we don’t bother tracking inventory.
Now we are going to look at what it looks like when we’ve grown and have lemonade stands on every major block. We need to keep track of inventory and when there are ingredients involved which are used in the production of an end product such as lemons, sugar, and water to make lemonade, we need to track the inventories of each ingredient as inventory parts as well as how much we’ve produced and sold in terms of our end product and that means creating inventory assembly items in QuickBooks.
So now we are looking at what happens when our Lemonade business (we’ll call it “Lemonerd”) takes off and now we have stands at every major block around town. We have to track those inventory parts and inventory assembly items in order to be able to properly manage all of these lemonade stands.
Anytime you make something out of several other things, you have the same generic process. Once again, in QuickBooks terms we are talking about Inventory Assembly Items. Inventory Assembly Items in QuickBooks are items that are made from 1 or more other inventory parts. In my Bookkeeping basics examples I kept it simple by recording all sales as deposits posting directly to an income account. Now in this lesson we will look at it at a much more complex level. We have to track our ingredients inventory. There is some planning required on this because you have to figure out what you need to buy, how much lemonade that will produce and you have to be able to convert the numbers from what you’ve bought in bulk to what it costs to produce 1 glass of Lemonade. Here is the information I gathered:
- 1 Pitcher Serves 6 people
- So when we buy the items we buy them in bulk – a 5lb bag of sugar, but then when we make a pitcher it needs to take a quantity out in terms of cups. So a 5lb bag of sugar equals 11.25 cups. That’s how we need to bring it in because a pitcher is going to use 1 cup.
- The same concept applies to all of the other ingredients. Everything needs to be described in terms of how many cups it makes.
- Once we have the items set up we need to purchase them and record the items.
- Then create the assembly items.
- Then we can sell our cups.