This is a guest post by Harry Landsburg, Director of Business Process Technology Consulting for the Delaware Valley Industrial Resource Center.
Get Sheldon Needle’s summary here:
Many job shops get orders for items on an individual or recurring basis. Orders for a specific raw material item where the finished product will not be re-ordered by a customer typically involve buying needed parts to the specific job. The cost of those raw material items can be charged to the job in full or a portion can be charged to the job which leaves the Company with raw material inventory of the unused parts that were bought because of a minimum order restriction.