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How to capitalise Direct Labour costs onto Product / Work in Process?

By
Jonathon Clarke
on 6/8/14, 6:06 PM 1,906 views

I cannot work out how to capitalise some Direct Labour onto a Manufactured Product. For example, when processing a Manufacturing Order, I cannot produce an accounting entry in my 'work in progress' asset account for the labour costs of manufacturing the product. 

Without a true product cost (including labour or workcenter cost) I end up with a hole in my Work In Process Account when transfering the true product cost into finished goods.

I can see two possible methods, neither of which are currently giving me a result.

Method 1) In the BOM I have included LABOUR (product/service/make to stock/buy/units=hours) as a BOM component. This then shows in the BOM Product Cost Structure, but is not making an account/journal entry when processing the Manufacturing Order. Is this normal? I need this labour cost as an entry in an account, in this case the Work In Process Account, along with the entries for the other BOM components (products consumed). Obviously a Service Product does not have stock input, stock output & stock valuation accounts, but surely the Manufactiuring Order should process it somehow if it is on the BOM?

Method 2) In the Workcenter I have set General Account = Work In Process Account, but this seems to have no outcome when the Manufacturing Order is processed. I would like to see this Workcenter cost (cycle cost and hourly cost as set in workcenter) as an entry in my Work In Process Account, along with the Materials consumed, giving me a true product cost.

Method 3?)  - I have seen a youtube clip of an older version that showed Product Accounts in the Product Categories configuration, with WIP, Setup, Amortisation, etc, accounts to be set for Product Categories. Do I need to install some other module? https://www.youtube.com/watch?v=kjW8dNjGqAo   -See 2 minutes in, all the account feilds in the lower part of the screen. How do I get all these account feilds? I only have income, expense, stock input, stock output, & stock valuation.

Surely it is a normal function to capitalise direct labour onto product cost in inventory? Possibly I have a bug?

Can anyone provide a simple solution suitable for my fairly simple manufacturing operation to allow labour or workcenter cost to make an accounting entry in my general accounts? Thank you.

My account setup (anglo-saxon):

Asset accounts/inventory/ four inventory accounts being: -Raw Materials, -Work In Process, -Finished Goods, -Stock Movements Acc

P&L/Revenue/ -Sales Account

P&L/Expense/ -COGS Account

My product setup:

All Products/Materials/Raw Materials: Expense=COGS, Income=Sales, StockInput=StockMovementsAcc, StockOutput=WorkInProcess, StockValuation=RawMaterials, Journal=Stock.

All Products/Saleable/Manufactured Finished Goods: Expense=COGS, Income=Sales, StockInput=WorkInProcess, StockOutput=StockMovementsAcc, StockValuation=FinishedGoods, Journal=Stock.

All Products/Saleable/Purchased Finished Goods: Expense=COGS, Income=Sales, StockInput=StockMovementsAcc, StockOutput=StockMovementsAcc, StockValuation=FinishedGoods, Journal=Stock.

 

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Asked: 6/8/14, 6:06 PM
Seen: 1906 times
Last updated: 7/2/15, 5:50 AM