Tracking Manufacturing Profitability.

Question:

Need some help with how to set up my sales receipts? I make shirts for dogs. I buy the material, make the shirt, and then sell the shirt. I can't figure out which item to use in the sales receipt column. The closest I can come to is inventory part, but that really isn't accurate. I need to be able to track the material expenses for each shirt too. I looked up in the help & support, and it suggested I could use the inventory assembly item, which apparently I can only get if I got the more expensive Premium QuickBooks package. Is there any way to make this work with just my Basic QuickBooks?

Answer:

Unfortunately, I don't think that you can use inventory assembly items in QuickBooks Basic. Without knowing everything about your business, I would say that using that feature would be overkill for you. If you used an inventory assembly item in QuickBooks Premier, you would have to predetermine the exact number of components required to make each shirt. For instance, one shirt requires two yards of fabric, 10 feet of thread, etc.. While this information may be nice to have, if you are hand making the shirts it would be next to impossible to determine this. It would also be tedious to setup and maintain.

I have a few suggestions:

• If you make the shirts custom and in small quantities you could set up each one as a job, and you could see the profitability in the job reports.
• Otherwise, I would just put the income in an income account, and all the direct expenses in a cost of sales account. Then use the profit and loss statement (Gross Profit) to track item profitability.