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Include labour cost when using Auto-Build

When you use the Auto-Build function to create finished items, you might want to include labour costs into the price of the finished item.

To do this, you can create a stock item called Labour Cost and include it as a required component of the finished item.

Based on your business, you need to know your labour cost and the minimum time increment for charging labour.

Here's a basic example:

  • labour cost is $60 per hour

  • labour is charged at 1 minute increments

By setting up a stock item for labour costs means you also need to enter an opening balance for the item. This allows you to consume units of labour the same way you consume units of the other stock items to build a finished item. 

When the finished product is made, the labour cost will be taken from the Cost of Sales account and transferred to the Inventory Account for the finished product.

When the finished product is sold, the cost will be incorporated into the Cost of Sales account for the finished product. The labour portion of the finished product's Cost of Sales will be cancelled by the negative balance of the labour item's Cost of Sales account. This is necessary to prevent your Profit & Loss report showing the labour cost twice, as it is actually paid in the Wages or Salary expense accounts instead.