In NetSuite, the average cost of an assembly item is directly impacted by the average cost of its individual components. This recalculation happens when an assembly build is initiated, ensuring that the overall cost of the assembly is accurately reflected based on the components used.
Average Cost Calculation
The average cost of inventory items in NetSuite follows a specific formula:
Average Cost = (Total Value + Last Purchase Price)
On-Hand Quantity
This calculation is applied to both individual components and assembly items. For assembly items, the cost is derived from the sum of the average costs of the components multiplied by their respective quantities in the assembly.
Assembly Item Cost Behavior
When an assembly item has stock on hand, NetSuite uses the existing average cost at the time of sale. However, when the on-hand quantity of an assembly item reaches zero, a work order must be created to replenish the stock. This work order is followed by an assembly build, where the system recalculates the assembly’s average cost based on the current cost of the components.
Impact of Inactive Components
One critical issue arises when any component in the BOM (Bill of Materials) for an assembly item is marked as inactive. NetSuite will not allow the creation of a work order in such cases, as inactive components prevent the assembly build from proceeding. This means that without the ability to create a work order, the assembly item cannot be built, and consequently, there will be no stock available for sale.
This scenario can lead to interruptions in sales and inventory management, emphasizing the importance of managing BOM components and avoiding inactivating essential parts of assembly items.