Costs and work in progress
How the real cost of an order is worked out, how it reaches your stock value, and the month-end work-in-progress entry.
Go to Costing to see planned against real on your finished orders. Real cost comes with Standard and above, and work-in-progress entries with Professional and above.
What an order costs
Finished goods enter stock at material + labour + overhead.
- Material - what was used, at its cost in your stock on that day.
- Labour - time worked, at the work centre's machine cost plus the operator's cost an hour. If the operator has no cost of their own, the work centre's Operator cost is used.
- Overhead - time worked at the work centre's Overhead an hour, plus Overhead on material % from the BoM or, if it has none, from settings.
Each order shows Planned against Real, and Cost each.
By-products
A by-product can carry a share of the cost. If a by-product has a 10% Share of cost, it enters stock with 10% of the total, and the main product carries the rest. See Bills of materials.
Very small unit costs
If something costs less than 0.01 a unit, such as screws by the thousand, the order keeps the small figure, and you can read it under Cost each. The stock movement keeps 2 decimals, so look at the order for the fine cost.
How this reaches your books
Finished goods come into stock at their full cost, so your stock value and profit carry it with no extra entry. Your wages and machine bills stay as expenses. Closing stock takes back the part still in unsold goods.
Switch on Finishing an order updates the item's purchase price in settings if you want the item's price to follow.
Work in progress
For month-end. If orders are still open on the last day of the month, their labour and overhead so far aren't in your stock yet. This entry puts them on your balance sheet.
The work-in-progress entry covers labour and overhead only. Materials stay in stock until an order finishes, so they aren't counted twice.
On Costing, under Work in progress, check the list and click Put in the books. Choose the Date of the entry. It reverses by itself the next day, or on the date you set under Reversed on.
The entry moves the amount to a Work in Progress account, against Production Cost Absorbed. Both accounts are made the first time you need them. Entries made lists what you've done.
If you aren't sure whether you need this entry, ask your accountant.
See also
The Cost analysis, Scrap and Work in progress reports. See Reports.