Create an Item called Labor it should be either a non-inventory part, service or other charge.
If you create it in QuickBooks, check the 'This service is performed by a sub-contractor, owner or partner'.
Enter a cost, the cost should estimate the hourly wages and benefits.
Select any income account.
For the expense account, create a new account called 'Salaries Applied to Finished Goods'
Include the labor component in bill of materials as appropriate.
When you finish production, the labor cost will be deducted from Salaries Applied to Finished Goods expense and included in the cost of your finished product.
On a regular basis compare the Salaries Applied to Finished Goods to the Salaries expense account. In a perfect world these two accounts should be exactly the same but they probably never will.
If the Salaries account is greater than the Salaries Applied to Finished Goods this means that either a) you have processed payroll but have not yet finished product or b) the Cost amount on the item is too low.
If the Salaries account is less than the Salaries Applied to Finished Goods this means that either a) you have finished product but have not yet processed payroll or b) the 'Cost' amount on the item is too high.
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