What is a bill of materials?
A bill of materials lists each component and the quantity that you need to make one unit of a finished product. It can also hold labour and overhead costs, and a scrap factor for the material that you lose in production.
A multi-level BOM contains a component that has its own BOM, for example a base mix that you make first. Keep a revision of the BOM for each change to the recipe, so that old production keeps its old cost.
The formula
Quantity with scrap = quantity × (1 + scrap factor)
BOM cost = Σ (quantity with scrap × unit cost of the component) + labour + overhead
- Use the component price that applied on the production date, not the latest price.
A worked example
Cold Craft, Madagascar Vanilla 500ml tub
- Ice cream base: 0.5 litre at R28 a litre, with a 4% scrap factor. 0.52 litre costs R14.56.
- Vanilla extract: 5 ml at R0.60 a ml costs R3.00.
- The tub costs R2.10, and the lid costs R0.90.
- Labour and overhead are R4.00 for each tub.
The BOM cost is R14.56 + R3.00 + R2.10 + R0.90 + R4.00 = R24.56 for each tub. These figures are an example for the demo company.
Bill of materials in Miridia
Miridia holds assembly and kit BOMs with revisions, effective dates, scrap factors, and cost lines for labour and overhead. The BOM cost uses the price history of each component at a date, and multi-level BOMs expand in full. A work order consumes the BOM into real stock movements.