We have a number of items we manufacture. Several models are very close to each other with small tweaks. On occasion we need to take a ‘finished’ product and do the tweak to change it to a different item. I’ve tried to create a negative Production order (-1 item) and each part quantity with a ‘-’ in front of it. While this did show in the Production order list, it made absolutely no difference in quantity owned in inventory.
Am i using wrong math to make this happen, is there a better way to do it, or do I need to find a previous production run and change it to one less item?
Production orders are one-way transactions. Negative quantities are ignored. A negative input is not turned into an output.
The way to tweak your finished product into something else is to define a new inventory item for the something else. Then accomplish the conversion by entering a production order with the original finished item a part of the bill of materials. Enter the new item as the finished item on the production order.
Another reason we’d like a ‘deconstruct’ - occasionally we build a unit that has a problem (these are electronics) and can’t be fixed. BUT some of the components can be removed and are fine to use again (including boxes and connectors). We don’t want to write off the entire product if we can reuse parts of it.
If I reuse a part, then it messes up the individual item inventory if it was written off as a whole product - it’s suddenly higher than expected and, honestly, I don’t know how your program would handle ‘adding’ a product this way.
That is not advisable, because it leaves you with nothing to sell. And it means the average cost of the remaining finished items is higher than it should be, because all the bill of materials costs will be divided among one fewer units.
I did not mention this in my earlier post, because I didn’t want to confuse you unnecessarily, but if the tweaked item is a one-time product, you might not want to create new inventory item at all. Instead, you might want to go straight to a write-off, posting to some suitable expense account. Then, post that line item on the sales invoice to the same expense account, which will effectively be functioning as a clearing account. The disadvantages of this method are that you lose the ability for profit margin reporting, and sales will no longer be posted to Inventory - sales. You will need to choose some other income account.
Then use a Journal Entry. This enables you to reduce, add back and write off all in one action.
The only drawback is that you will need to record separately (on paper) the average cost values before creating the Journal Entry as each Inventory Item line of entry starts with the “Inventory on hand” account rather then the Inventory Item itself.
Alternatively @KrisK, if the finished product is being sold then you could enter the tweak within the Sales Invoice with quantity only (no money) entries if you want to disclose that information.
