Manufacturing & Operations Tutorial: Step-by-Step – Beverage Production

The Production Module is the heart of a beverage manufacturing business. This module manages the transformation of Raw Materials (RM) into Finished Goods (FG). The goal is to track Assembly (Filling & Packaging), Disassembly (Handling returned or rejected products), and Full Costing (including VAT and Overheads).

The purpose of this module is to convert raw inputs into high-value finished beverages while maintaining strict quality control, accurate costing, and efficient resource utilization.

Purpose of the Tutorial:

This document provides a real-world simulation of a cola manufacturing cycle. By following this guide, users will learn:

• How to handle Material Procurement.

• How to execute an Assembly (Manufacturing Order for bulk cola and bottled cola).

• How to perform a Disassembly (Handling returned or defective bottles).

• How to calculate the Final Landed Cost including VAT, packaging, and overheads.

• How to track By-products and process losses.

Company Overview:

Company: Gulf Cola Ltd.

Product: Cola 500ml PET Bottle

Batch Size: 1000 bottles (500 liters bulk cola)

VAT on Raw Materials: 5% (purchase)

Step 1: Procurement

Before production starts, check the stock availability of raw materials. Here we purchase the raw materials.

Packaging Materials (for 1,000 bottles)

Also, 

Direct Labor Cost

Role Daily Cost

Production workers $100

Machine operator $80

QC staff $30

FACTORY OVERHEAD (1 Production Day)

Item Cost

Electricity $80

Water utility $25

Gas $40

Maintenance $50

Depreciation $80

** If the cost is paid monthly, convert all monthly costs into daily or hourly costs, then allocate them to the product.**

VAT Management:

Recoverable Input VAT from raw material purchases is recorded separately and not included in production cost, while non-recoverable taxes (import duty, excise, regulatory fees) are absorbed into inventory and finished goods cost.

Output VAT is applied only at the sales stage, and net VAT payable equals Output VAT minus Input VAT.

Input VAT / Purchase VAT:

Navigate to

Sidebar > Setting > GST/TAX/VAT > Create Product TAX

Non-recoverable taxes:

Navigate to

Sidebar > Setting > GST/TAX/VAT > Create Product TAX

If you have multiple non-recoverable taxes, like

• Exise Duty 

• Supplementary TAX

• Custom TAX

• Regulatory TAX

• Manufacturing TAX

• Govt. TAX

• Others

Then you have to combine the taxes first.

• Input the TAX name

• Select no for Is non-GST

• Select multiple taxes in the TAX group box

• Save the TAX

TAX / VAT applies to manufacturing:

When adding RAW materials, the VAT purchase rate should be added in there.

Navigate to

Sidebar > Products > Add product > purchase VAT + enable component product button

And the non-recoverable VAT applies when creating the BOM or assemblies. 

Navigate to:

Sidebar > Production > Add BOM / Assemble 

Add Product:

Before starting, ensure all items are in the system. A list of previously prepared bills of material for certain products is displayed. Click the Add NEW button to start a new one.

Add new product with details:

Navigate to:

Sidebar > Product > Add product

For the bill of materials and assemblies, ensure product type: 

Never diminishing: We activate this button when adding services.

Assembled product: Enable this if the product is manufactured by assembling multiple components through the production module.

Component product: Enable this if the product will be used as a raw material or as an input in the assembly of another product.

Obsolete: Enable this to mark a  product as discontinued so it cannot be used in new sales, purchases, or production

Serialized: Enable this if each unit of the product must have a unique serial number for individual tracking, warranty control, and traceability.

Batch Tracked: Enable this if the product needs lot/batch number tracking for inventory control and traceability.

Saleable: Enable this if the product can be sold and included in sales orders or invoices.

Purchaseable: Enable this if the product can be purchased from suppliers and included in purchase orders.

Here, we add direct labor cost & factory overhead as suppliers, and will include the assemblies. 

Navigate to:

Sidebar > Contact > Add Contact > Supplier

Opening Stock/Purchases:

Before starting production, ensure materials/components are available. 

Navigate to:

Sidebar > Inventory > Add opening stock

Or,

Sidebar > Purchase > New Order

Sidebar > Inventory > Receive Purchase Order

Here, we purchase the raw materials:

How to Manage Batch:

When adding a new product, ensure the batch track button is active.

Stock adjustment with managing batch

• Batch number 

• Total Quantity

• Expiry date

• Save

How to manage serial:

When adding a product in the system, ensure the serialized button is active. 

Manage Inventory with serial number:

• Manage serial

• Prefix

• Padding number

• Auto-generate serial number

• Add serial number

Bill of Materials (BOM)

Navigate to

Sidebar > Production > Add Bill of Materials

Cola 500ml  – 1 Batch (1,000 Pcs)

Product: Select the assembled product

Duration type: Per Assembly

Bill number: Auto-generated 

Expected duration: 8 hours

Quantity of final product: 1000 pcs

Production Hours Per Day: 8 hours

Tax: If applicable

Production Days: Monday

Comment: If any

Component product: Select the component product

Quantity: Component product quantity for the batch

Wastage Quantity: The amount of wastage quantity by individual component product.

WQ type: Wastage quantity by flat amount or percentage

So, here are our bill of materials details 

BOM:

Can Auto Assemble: If you enable this button, it automatically creates a BOM when product inventory is low.

Auto Assign oldest batch/serial: Enable automatic assignment of a new batch to the oldest batch or serial.

Can auto disassemble: To disassemble the BOM automatically, enable this button.

Obsolete: If the BOM is no longer used, enable this button.

After save & close, the BOM will be stored in the Bill of Materials list:

Here, the action button for

• View the BOM

• Edit The BOM

• Delete the BOM

Add Assembly:

Now assemble a new production order.

Navigate to:

Sidebar > Production > Add assemble

Source Warehouse: Select the warehouse where raw materials were issued for this batch. (Main Warehouse)

Destination Warehouse: The warehouse where the manufactured product will be stored. (Main Warehouse)

Product: The final product is made from raw materials.(Fresh Crispy Cookies)

BOM: After selecting the product, the Bill of Materials number is selected automatically. (BOM-260403-000001)

Assemble Quantity: Number of total final products. (1000 pcs)

Can Assemble Quantity: The ability of final production with given raw materials. 

Assembled by: The date of assembly.

Expected Duration: Expected time duration for this assembly. (08 hours)

Actual Duration: Actual time to complete the assembly. 

TAX: Input the Tax rate if applicable

Comment: Any comment about the assembly.

Duration Comment: Any comment about whether it changes the duration.

Component Product: Availability to add more component products if required.

Assembly line: List of Component products and their details.

Supplier cost: The supplier cost details and add new supplier cost from here.

By-products: Set the assembly cost by-products unit.

Attachment: Assembly-related document or file attachment availability.

Batch: Manage the assembly batch.

Add direct labor cost & Factory overhead:

Navigate to

Sidebar > Contact > Add new contact > Supplier

We have added these costs as supplier costs here. 

By Products: 

A by-product is a secondary or incidental item produced during the manufacturing of a main product. While the Main Product is the primary focus of production, the By-product also has some commercial value and can be sold in the market. 

Handling by-products is crucial because it affects both your Inventory (stock increases for two different items) and your Costing (the by-product can reduce the cost of the main product). 

First, add the by-product details from the product module

Navigate: sidebar > product > Add new product

Create purchase (if needed):

Shows the availability of the product

Mark the short product

Click " Create Purchase " and make a purchase

List of Assemblies:

Displays all assembly transactions, checks & changes the assembly status. View, edit & delete the assembly. 

Change the status:

Inventory Status:

Now, we can see the inventory status changes.

Final product quantity 1000 pcs

Inventory levels for all related components have decreased.

Add Disassembly:

Navigate to

Sidebar > Production > Add disassembly

When disassembling, not all raw materials can be fully recovered. Some may be lost.

This loss is called production loss, and the system is counted as uncategorize expenses. 

Here,

• Select the product

• Input disassemble quantity

• Component product quantity count automatically & Manual input availability

List of Disassemblies:

Shows all disassembly transactions, detailing which finished products were broken down and components recovered. Change the status. View, edit, & delete the disassembly.

Change the status & View status:

Click on the select button & change the status, or edit, delete, & view the disassemble.

After disassembling, the inventory will be revised again.

Any valuation loss incurred during the disassembly process is recognized as an uncategorized expense in the general ledger. 

Report Section

Inventory Report:

Final Product transaction report:

Product-wise cost report:

Ledger Report:

Income statement report:

Uncategorized expense is the value of the disassembly losses. 

Trial Balance:

Uncategorize expense

Direct labor cost & Factory overhead as accounts payable (due to unpaid)

Balance Sheet report: