Handling free products
Products that are given away for free (resulting in zero revenue) can be handled in two different ways, depending on the way you wish to represent it and how you want it to be reported.
A. Add an order for the free product, ensuring that you set the sale cost to be zero or
B. Add an inventory adjustment for the product that has been removed from inventory.
Both methods will calculate the material cost of the product given away in exactly the same manner and will include this as part of your cost of goods sold calculations.
However, using option A will also include the material cost in your estimated cost of manufacture for orders sold within the period, which appears on your Order Summary and Profit and Loss reports so if you don't wish for the free item to be represented here, it may be best to use an inventory adjustment instead. Option A will allow you to add details about the customer receiving the item, along with notes to describe why the item was provided as a giveaway.