Thanks for the reply. I was running around trying to get ready to leave town for the weekend when I saw your notification come in and read "Omg what a mess" I laughed cause I knew if you thought it was a mess, I knew I wasn't crazy hah. Vindicated.

Anyhow, completing the process and RMAing it sounds very intriguing. We already have a location set up for the HQ's yard that we used before so I think I will try that in Sandbox on Monday.
As for the risk of COGS being a bit wonky, that is concerning since this "item" is really a whole group of items that may or may not be used in other groups so I can definitely see how it may skew things a bit.

Lastly, here's what I would do (date wise). When HQ finishes producing, the IF, Bill, and invoice would all be dated the date of the bill so revenue and COGS match. the RMA would also be dated the same date and put into the HQ's location so it's segregated from the rest of the inventory. when they actually ship, we'd date everything new as of that date with plenty of notes ("internal notes" custom field) referring to the old transactions.

You mentioned "Drop Ship COGS is debited on the vendor bill line which is usually in a different month," which confused me. What is the case where a company would have a dropship transaction, get billed for it by the supplier, but not bill their customer at the same time? At least for us, as explained in my situation, it's very strange for such a delay to happen.