This is a very big question when it comes to running a jewelry fabrication business. The IRS, in theory requires that you track every single item that goes into the production of a piece. You are supposed to select an accounting method, First in First out, or Last in Last out, AND you have to report which method you use. Software like quicken does not easily let you assemble a product from goods and then sell that piece. The software mentioned in other posts help you do this. Back in 2010, I tried the few software packages on the market, and selected Bead Pro Manager. It was a nice start but it didn't suit my needs, so I ended up writing my own software in File Manager Pro. It has evolved with me as my business has grown and allows me to easily manage my inventory, casting costs, pieces COG, sales, exports to my website, etc....So yes, I know my COG for each piece. As for the accounting method on items I buy repeatedly, I use an averaging method. This approach is probably not valid if I am audited, but it is too difficult to track all the waste, and lost material, or pieces that I reuse. I also calculate my running inventory value, (which is required to be report to IRS) by calculating the total amount I spent on parts that year, minus the total COG in pieces sold (not items not sold). If my business grows to provide me a significant revenue in the future, I will shift to one of the official reporting methods instead of average. At this point, the averaging method is not in my favor in terms of taxes, so I have not invested the time to change it. At that point, I will be required the report in the accounting method change and assess the impact on previously paid taxes.
I would expect that your decision as to how to proceed depends on the size of your business. If your business is not your primary source of income and you are a sole proprietor and do not take many deductions from your personal income you might not want to follow my example. On the other hand, if you have a significant full-time business and buy a lot of precious metal and have significant deductions, you might want to talk to a few different accounts on how you can move forward from this point since you have not been tracking this detail.