Creating a Bill of Materials (BOM)
A Bill of Materials (BOM) defines the recipe for your manufactured products. It details the raw materials required, any by-products created, and the operational expenses associated with the production process.
Important Prerequisite: Before creating a BOM, ensure the product is properly configured. You must check the “Manufacture this item” box in the Product settings.
If this option is not ticked, the product will not appear in the “Select Product” dropdown.
BOM Setup Guide
General Information
Navigate to Bill of Materials > + Add Bill of Material. Start by defining the output of this manufacturing process:
- Product: Select the finished good you are creating.
- Quantity: Define the yield for this recipe (e.g., 1 Unit).
Add Raw Materials
Define the input materials required to produce the finished good.
- Click on the Raw Materials tab.
- Click Add New Line.
- Item: Select the raw material component.
- Quantity: Enter the amount of this material required to make the specific quantity of the finished good defined above.
Add By Products (Optional)
If your manufacturing process results in secondary items (scrap, waste, or secondary sellable goods), define them here.
- Click on the By Products tab.
- Click Add New Line.
- Item: Select the by-product item.
- Quantity: Enter the quantity generated.
- Cost Allocation: Enter the percentage (%) of the total production cost that should be assigned to this by-product.
Add Production Expenses
Include overhead costs such as labor, electricity, or machine hours to calculate the true cost of the product.
- Click on the Production Expenses tab.
- Click Add New Line.
- Cost Term Debit: Select the expense account (e.g., Manufacturing Wages).
- Cost Term Credit: Select the account to credit (e.g., Wages Payable or Cash).
- Amount: Enter the fixed cost associated with this production batch.
Save
Once all lines are added, click the Save button in the top right corner to finalize the BOM.