Re: [SL] Accounting for fuel inventory in a small power generator

[Michael H. <mh...@it...>]

I guess that wasn't very clear, was it?  :)  The service items for  
our whiteboxes are indeed service.
    The power generating problem is a bit tougher though because  
while service items are "soft", inventory items are not.  So if one  
of my guys spends an extra fifteen minutes building a machine we can  
just absorb it and inventory is not affected.
    In the power generation case though the equation goes the other  
way, if one of his generators gets a leaky exhaust valve or something  
and nobody notices for awhile, it will subtly skew the output-power/ 
fuel ratio and he'll have burned more fuel per megawatt than usual  
which is a lot harder to "absorb" as he's paying actual money for  
that.  He'll have to either constantly tweak the ratio in his billing  
or have a periodic adjustment entry, (which I guess is not so  
different from our update "invoices" when we take inventory and have  
to account for the misc cables and things that were never actually  
billed).


Thanks,

Michael


On Jan 26, 2007, at 9:03 AM, Paul Tammes wrote:

> Michael Hasse schreef:
>> Speaking to this a little further, some of our products are
>> "whiteboxes", which are PCs assembled by us from components purchased
>> wholesale.  Our assemblies include a line item for the typical total
>> shipping cost of the components and also a figure for the calculated
>> labor cost of purchasing, assembling, etc.  In this case of course
>> we're going the other direction, taking an intangible and making it
>> part of a tangible.
>>
> In those circumstances I strongly suggest you use a service item  
> for the
> services and an inventory item for the goods.
> An assembly of goods and services should then give correct figures for
> hardware (inventory) and COGS one way.
> And as a bonus, revenue for services the other way..
>
>
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