Bill of materials definition
/What is a Bill of Materials?
A bill of materials is the record of the raw materials, sub-assemblies and supplies used to construct a product. It contains a description, unit count, and scrap estimate for each line item. This document must be extremely accurate. If this is not the case, an organization may order incorrectly from suppliers and pull the wrong items from stock for a production run, which can result in major delays in the production process.
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Who Uses a Bill of Materials?
Several parties within a business use the bill of materials. They are as follows:
Cost accountant. The cost accountant uses the bill of materials to calculate the cost of a product. This information can be used to estimate the margins on products, as well as to calculate a standard cost of goods sold or ending inventory valuation.
Materials manager. The materials management staff uses the bill of materials to order parts from suppliers. This is usually done in conjunction with a material requirements planning (MRP) system, which calculates the number of component parts needed for a scheduled production run, subtracts out any unallocated parts already on hand, and then places orders with suppliers for the remaining required quantities.
Terms Similar to Bill of Materials
A bill of materials is also known as an assembly component list.