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Invoice note sample for Operations

so let us look at an example of bill of materials so in this example we have been given this bomb where the end item is a and a has components b and c b has components d and e and c has components f and d and f has g now as you can see in this bomb the usage quantities have been mentioned in parenthesis so for one unit or one number of and item a to be produced we need three quantities of b now for each quantity of b we need one quantity of d and two quantities of e similarly we have been given that for each quantity of a we need one quantity of c and for each quantity of c we need one quantity of f and one quantity of d and for each quantity of f we need one quantity of g now the question is that if there is no existing inventory how many units of g e and d must be purchased produce five units of and item a so g which is this one here e this one here and d so this one here so basically they are saying if five quantities of a are to be produced then how many quantities of e d and g are required to be purchased so this is one of the main functions of a bomb right when so if you get an order from the customer that okay i need to supply five quantities of a now in order to be able to assemble or manufacture a you will need all these components so you may be able to manufacture b in-house or a symbol b in-house within your premises but you have to order these end components d e and g from your supplier so now you have to ensure that you are not over purchasing or under purchasing because if you under purchase then you will not be able to manufacture all five quantities if you over purchase then you will have these end items sitting in your inventory and locking your funds so so this is one of the most important functions of the bill of material to identify how much quantity of the n components is required so let's find out so let's first find out how many quantities of e is required now let's see the the the chain right so one unit of a requires three units of b and one unit of b requires 2 units of e so now if we have to manufacture 5 units of a so the quantity required for b will be 5 into 3 so 5 into 3 so basically that means 5 into 3 b are required now each b requires 2 e so 15 b's will require 15 multiplied by two e's so this multiplied by 2. so this will be 5 into 3 is 15 15 into 2 is 30. so 30 units of e will be required now next let's understand how much d will be required now as you can see one unit of a requires three units of b and one unit of b requires one unit of d so if we have to have 5 units of a so 5 units of a that means b will be 5 into 3 that is 15 and each unit of b requires 1 unit of d so d will also be 5 into 3. so 5 into 3 is equal to 15. however d is also required to assemble or manufacture c so when you're ordering d from the supplier you have to ensure that you have catering to all the requirements of d required to manufacture a so now we have one unit of a requires one unit of c and one unit of c requires one unit of d so 5 units of a will require 5 into 1 that is 5 c and 5 c will require 5 d's so this will be 5 into 1 into 1 of course which will be 5. so total will be 20 units of d will be required to manufacture five units of a now next let's look at g now one unit of a requires one end of c one unit of c requires one unit of f and one unit of f requires one unit of g so basically one unit of a requires one unit of g so five units of a will require five units of g so this will be 5 into 1 into 1 into 1 which will be 5 units so this is how you can find out how many quantities of e d and g are required to produce five units of end item a