My company does not do any manufacturing, but we do refurbishing. What is the best way to notate that we are using a part to refurbish/repair another item, and add the cost to the repaired unit? Right now we are using adjustments. Is it possible to do this without adjusting inventory?

That's the standard way without utilizing manufacturing/work orders.

thats what i thought. work orders require assembly items right?

Yep... Assembly item, BOMs, etc.