You reviewed the production line after recording a completion of one hundred shirts, and it turned out that fifteen of them were never produced. They entered your inventory on paper, their components left the warehouse, and their entries were posted, so they became figures that need correcting.
It may not be an error at all: you assemble computers from a monitor, a processing unit, and a keyboard, then demand for the assembled units dries up while monitors alone are in demand. So you take apart what is left of them, and their parts return to inventory for you to sell separately.
In both cases, a Disassembly Order does the same thing: it takes the units out of your finished goods inventory and returns their components to the warehouse at their value.
But it is not a clean reversal of manufacturing. The components come back to you, but the labor and overhead you charged to those units have nowhere to return to, so they are written off as an expense. As a result, your inventory does not return to its pre-manufacturing value, and disassembling a unit and manufacturing it again does not take you back to the starting point.
This guide covers where disassembly starts, how the system calculates what comes back to you, what it records in your books, and what does not change afterward.
Before you start
Disassembly needs two things:
- Units of the assembly item in your inventory. Disassembly works against your current balance, not against a production order that has no completions recorded on it.
- A material variance account configured in Inventory settings. This is the account where assembly work is written off, and the system will not post without it.
For more on setting up manufacturing accounts, see How to Create and Execute a Production Order.
Creating a Disassembly Order
Click "Inventory" in the main menu, choose "Disassembly orders", then click "New disassembly order".
Then enter the order details:
- Assembly item: the item you want to disassemble. Only assembly items that have a Bill of Materials appear in this list.
- Warehouse: the warehouse the units are deducted from and the components return to.
- Disassembly date: the date at which the system calculates costs and balances, and the date the entries are posted under.
- Quantity to disassemble: the number of units. The system shows your available balance of the item beneath the field so you know your limit.
- Reference and Notes: optional, to label the order or record the reason for it.
Disassembly costs
Disassembly itself sometimes has a cost: wages for the workers taking the units apart, a workshop fee, or any expense you incur to carry out the operation. You add it in the Additional costs section by clicking "Add cost" and specifying the type, account, and amount.
These costs are entirely optional; if disassembly costs you nothing, leave the section empty.
Components returned from disassembly
As soon as you select the item and the quantity, the system displays a table of what will come back to you: one row per component, with its returned quantity, unit cost, and line total.
You do not need to enter anything in this table. The system calculates it from the Bill of Materials in effect on the disassembly date, multiplied by the quantity, and prices it at each component's average cost in your inventory today.
Example: In a disassembly of 15 shirts, 150 meters of thread came back (ten per shirt) and 90 buttons (six per shirt). The fabric, however, came back as 25 meters rather than 22.5 — because its yield is 90%, so the system returns the quantity that was actually drawn from the warehouse, planned scrap included.
Warning: The system calculates the returning components from the Bill of Materials on the disassembly date, not from the quantities actually consumed in those units. So if you edited the BOM after manufacturing them, what comes back to you is what the BOM specifies today. Review the table before posting if you have changed your Bill of Materials recently.
Note: Components are priced at their average cost in your inventory on the disassembly date, not at their cost at the time of manufacturing. These costs are frozen on posting and do not change afterward.
Cost summary
At the bottom of the screen you will find four cards summarizing the effect of the disassembly before you post it:
- Value drawn from inventory: what you will lose from your finished goods inventory — the quantity multiplied by the average cost of its unit.
- Components returned: the total value of the components going back to the warehouse.
- Finished item unit cost: the average cost of one unit of your finished item.
- Assembly work written off: the difference between the first two values, and what you lose in the operation. It appears in red.
Example: In a disassembly of 15 shirts, SAR 867.50 left your inventory — 15 shirts at SAR 57.83 each — and components worth SAR 702.50 came back, leaving a difference of SAR 165 as assembly work written off. And that difference is not arbitrary: each shirt carried SAR 8 of labor and SAR 3 of overhead, that is SAR 11 of work per shirt, and fifteen shirts make SAR 165.
Why don't labor costs come back? Because a material is a tangible thing you know where to put: the fabric goes back to fabric inventory, and the buttons to button inventory. Work, on the other hand, was consumed in the assembly itself, and there is no "work inventory" for it to return to.
Nor can the system return it to the wage account it came out of, because it does not know which wages specifically went into these units: your inventory cost is calculated on a weighted average, so the figures from each production run dissolve into a single average and nothing remains to tie a batch of wages to a batch of production. All that is left is to charge it to the material variance account, where it settles as an expense on the period.
Posting the disassembly
Click "Post disassembly" at the top of the screen, or open the dropdown beside it and choose "Save as draft" if you want to review it later.
The system then shows a confirmation dialog summarizing what you are about to do: reducing the assembly item's inventory, and returning its components to the selected warehouse at its current average cost.
The disassembly journal entry
View the entry by hovering over the journal icon at the top of the document.
A disassembly records two independent movements in a single entry.
The first: exchanging the finished item for its components.
| Side | Account | Amount |
|---|---|---|
| Debit | Inventory of each returning component | 702.50 distributed across the components |
| Debit | Manufacturing material variance | 165.00 |
| Credit | Assembly item inventory | 867.50 |
Your component balances rise by their value, your shirt inventory falls by its value, and the difference — the assembly work — settles in the material variance account.
The second: the cost of the disassembly.
| Side | Account | Amount |
|---|---|---|
| Debit | Manufacturing material variance | 1,500.00 |
| Credit | The account you selected for the cost | 1,500.00 |
So the disassembly cost leaves the account it was entered against and settles, in turn, in the material variance account.
Note: Two kinds of amount therefore come together in the material variance account: assembly work written off, and disassembly costs. Both are an expense you bear in the period, and nothing in the entry separates them. If you want to track them separately, use the Reference or Notes field on your disassembly orders.
What does not change after a disassembly
What does not change after a disassembly
The Production Order that produced these units stays as it was: its status remains Completed, its completed quantity full, and its cost and variance figures untouched. Nothing on its screen shows that you took apart part of its output.
And that is by design: the Production Order records what you actually produced, and the disassembly is a separate, later event. So do not look for disassemblies among your production orders; look for them under Disassembly orders, or in the Production Register report, where they appear by type among your transactions.
What does change is your inventory alone: your finished item balance falls by the disassembled quantity, and your component balances rise.
Note: The average unit cost of your finished item does not change with a disassembly, because the units leave at the same average they entered at. Your components' average, however, may change if the value of what came back differs from the value of what was already in your inventory.
Reversing a disassembly
Click "Revert to draft" at the top of the posted disassembly order. The entry is deleted and the balances return to what they were: the units go back to your finished goods inventory, and the components that were returned are taken back out. The document becomes a draft again for you to edit or delete.
Warning: If you want to revert a Production Order to Planned and part of its output has been disassembled, the system refuses the operation and tells you the numbers of the posted disassembly documents. The order matters here: revert the disassembly orders to draft first, then revert the Production Order.
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