Like any other item on an assembly's bill of materials, the labor cost applied will be the unit cost for that item times the number of units on the BOM. The cost used for the labor will be whatever you have entered in the Last Unit Cost field for the labor item.

Thanks. My question was directed at the labor inventory item that is created in Sage. When I currently do an assembly, Sage will not let me build it if there is not enough of the bill of material components of the item in inventory. In those situations, we do an inventory adjustment to add enough of the component to complete the build. Does Sage treat the inventory component the same way, meaning I would have to add "labor" inventory to the physical count in order to complete the build?

You do not have to add "labor" inventory to the physical count in order to complete the build.

If you are adjusting the quantity on hand for labor, then your labor item is set up as a stock item. Stop using that item, set up a new labor item and be sure to set the Item Class to Labor. Then Sage 50 won't track quantity on hand for that item. Enter your average cost for one unit (usually an hour) of labor in the Last Unit Cost field.

You will also need to revise all of the affected bills of material to use the new labor item.