A hypothetical to illustrate what we are doing wrong:
 
We have a work order for 10 dining tables (Parent item TABLE #9).  BOM is
TABLE TOP #9                qty 1
TABLE LEG #9                  qty 4
BRACKET #12                   qty 8
WOOD SCREWS # 20       qty 16
 
1) We buy 100 leg blanks from ACME Wood with the item on the PO being LEG BLANK #5.  PO Unit cost is $10.
2) Item LEG BLANK #5 is received into stock and then all 100 are sent to Joes LatheWorks (who finishes the product for us) via a negative inventory adjustment.
3) Concurrently, a PO is written to Joes Lathe Works for qty 40 (the total work order qty) of the finished product, item TABLE LEG #9.  PO Unit Cost is $20.
4) We receive from Joes the qty 40 of TABLE LEG #9 into stock and turnaround to issue it to the dining table work order at $20 per unit.
 
 
So the problem is multiple.  Most importantly I think, we are not capturing the $10 cost of the LEG BLANK #5 in the finished cost of the parent item TABLE #9. Our COGS dummy acct ends up getting debited $1000 for the negative adjustment of 100 units.  We are also misusing the item TABLE LEG #9, putting it on the PO to Joes Lathe Works for the service of turning LEG BLANK #5 into TABLE LEG #9.
 
  My questions then:
A)  Would a type-M Make-From designation be proper for the TABLE LEG #9, with its BOM then being :
    1) LEG BLANK #5    
    2) LEG FINISH #5 (a T-type item for the service of      lathe, sanding and finishing    services?
 
B) Other possible options in regard to item and/or BOM setup?
C) Anything else to be aware of as far as correcting inventory movement and subsequent G/L accts?
 
Thanks!
Mike

Yes, it is a Make-From but you do not need the T item in the BOM, only the Leg Blank.  The cost of the lathe work should be defined as the Outside Processing component of Standard cost for the type M finished leg and that cost will automatically pull into the PO to Joe's Lathwork.
 
When the PO from Joe's Lathework is received, the leg blanks will automatically be depleted from inventory and their cost rolled up into the finished leg cost which in turn is issued to the WO for the table.

Yes, you can enter the PO to Joe's and manually enter the $20 price.  If you enter it into the standard cost screen it will pull into the PO automatically, that's all.  And will also correctly roll up into the total table standard cost.
 
But if the cost of the lathe work fluctuates, then yes, manually entering the cost might be less work.  In any event, the actual cost of the table will refect what is entered on the PO, not the standard.