Outside Processing Configuration: Charges for Subcontractor Services

If the subcontractor produces items at its location and then delivers the items to your warehouse, we recommend that you create an inventory item in MYOB Acumatica Manufacturing Edition for each produced item to recognize the item's cost. For example, suppose that the subcontractor fills containers that your organization has supplied with materials that the subcontractor supplies. In this case, your organization will be billed for the cost of the materials in the container and for the cost of labor required to fill the containers.

You use purchase orders to pay for the subcontractor's service. When the outside operation is complete, you release the purchase receipts related to the orders.

In the following sections, you will read about the configuration of the system for processing subcontractor's charges in the system.

Charges for Subcontractor Services

The service charges may or may not include materials the subcontractor uses for production. Depending on this factor and other conditions, you can use either stock or non-stock items for subcontractor services as follows:

• You use a stock item if any of the following is true for you:
  • You would like purchase orders to be allocated for production orders. In this case, you can use the Unreleased Material Allocations (AM305500) form to issue the allocated items.
  • You want to be able to use any valuation method available for stock items to better reflect the cost of the service.
  • You would like to use inventory planning for these items.
  • You need to apply transport costs to the unit costs of the services.
• You use a non-stock item if the subcontractor sends bills for services separately from produced items or when the services are the only charge. When you use non-stock items, you need to consider the following:
  • For non-stock items, you can use only the Standard valuation method.
  • You can use a separate non-stock item for each subcontractor service charge or use a single item for all service charges. If you use a single item, you set the standard item cost to 1.00 and specify the actual amount in the Qty. Required column of the Material tab on the Bill of Material (AM208000) form for the material that represents the service charge. For example, suppose that the subcontractor charges $0.53 per piece for one item and $1.23 for another; you would specify the quantity required as 0.53 and 1.23 respectively.
  • Non-stock items are not allocated to a production order; you must issue or backflush them in order to apply the cost to a production order.
  • You can decide whether a purchase order receipt is required for the non-stock item. When you use a purchase receipt, you can create a linked AP bill to record the purchase amount in GL.

Unless you need to issue lot- or serial-tracked materials, we recommend backflushing the materials consumed or produced by the subcontractor. If you are using a stock item for the service charge, you process the purchase receipt before issuing or backflushing the materials to update the average or FIFO cost. If you are using a non-stock item and the service cost differs from the planned cost, you change the quantity of the non-stock item to reflect the cost.

Cost Accrual for Non-Stock Items Used as Materials

You select the Accrue Cost check box on the Price/Cost tab and specify the accrual account in the Expense Accrual Account box on the GL Accounts tab of the Non-Stock Items (IN202000) form if the following conditions are met:

• You use non-stock items for materials used in outside processing.
• According to the business processes of your organization, the costs of these non-stock items must be accrued.

For details on the transactions the system generates for the item costs, see Outside Processing: Generated Transactions.