Clarity - Job Cost/Cost Allocation Setup Examples

Job Cost/Cost Allocation Setup Examples

For all of these examples, we will use the same basic setup as a starting point.  The employee has 1 Earning category ("Hourly Wages" of 80 hours at a rate of $50 per hour), 1 Benefit category ("Employer Paid Insurance" of $20), 1 Accrual category ("Vacation Pay" of $160.80) and 1 Tax category ("Federal Income Tax" of $778.66).

1. Job Cost - Using basic Job Cost allows you to both modify the rate of the category easily, as well as assign the GL for those entries on an individual Job basis.

Job Cost - If you have employees who work for multiple departments, and you track the wages to the departments where the work was done, but you keep their expenses (such as taxes) together (rather than splitting them out to those departments), then this is the preferred method.  When running payroll, you can specify the individual jobs via "Job Cost", and specify the G/L account the wages would be charged to.  If no G/L account is specified in "Job cost", then employee's home department G/L account would be used instead.  Also note that unlike the earlier, simpler methods, it is necessary to have your G/L accounts setup before you run payroll, as the G/L accounts are saved as part of the payroll.

See, G/L distribution by job cost, for details.

1. Manual Cost Allocation - The following diagram shows an example of splitting the Earning amount via Cost Allocation.  The GL accounts that will be impacted and the amounts they will receive are shown.

Manual Cost Allocation - This method let you setup G/L accounts at employee level overriding departmental G/L accounts.  Also note that unlike the earlier, simpler methods, it is necessary to have your G/L accounts setup before you run payroll, as the G/L accounts are saved as part of the payroll.  In this method, you would setup the employee's G/L accounts via cost allocation.

See, G/L distribution by manual cost allocation, for details.

1. Automatic Cost Allocation - This example shows a possible way of setting it up via Automatic Cost Allocation.

Automatic Cost Allocation - If you have employees who work for multiple departments, and you track the wages to the departments where the work was done, and the percentage split of the deductions & taxes are to match the percentage split of the wages for each department, then this is the preferred method.  When running payroll, you specify the individual jobs via "Job Cost".  If these are not specified, G/L accounts of the employee's home department would be used instead.   Also note that unlike the earlier, simpler methods, it is necessary to have your G/L accounts setup before you run payroll, as the G/L accounts are saved as part of the payroll.

The Automatic Cost Allocation feature allows you to distribute selected Tax, Payroll Taxes, Deductions, etc., to specific departments based on the actual wage amounts for those departments (as defined in employee’s Job Cost work details). In essence, Automatic Cost Allocation allows you to have your Taxes, Worker Compensation, etcetera, to “follow” the wages to the appropriate departments.

As an example, we will work with an employee who works 40 hours in a week. He works 10 hours in Department 1, 20 hours in department 2, and 10 hours in Department 3. These hours are entered using Job Costing, and are all for the same Job. His Job Cost work details would look as follows:

As you can see, he has three work detail records, all using the same category (102 – Hourly Wages), the same rate, and the same Job Codes. Each entry, however, has been allocated to a different department. Automatic Cost Allocation allows you to allocate (for example) the employer contribution to Taxes, workers compensation, etc. to these same departments, based on the amount of the wages for each department.

1. Labour - Leave the Earning categories with Normal distribution, and set the categories that you wish to be split out to type Labour.

Labour - To use the labour distribution model, you will select which payroll categories to distribute this category based on.  The system will then split all amounts for this category based on the relative percentages of those categories, and the G/L accounts populated will be the same as the ones of those other categories.  The G/L account to use for those other categories are themselves calculated based on whichever method you have chosen for them (as above).

See, G/L distribution by labour, for details.

Create the pay card as normal.  In our case, the Hourly Wages category is split up via Job Cost.

As you will now see, the Benefit category ("Employer paid Insurance") is now split out according to both the split of the normal Hourly Wages (as it is a Job Cost category), and the Overtime amounts.

Job costs | Detail tab

Payroll > Process Paycards > Edit Paycards > Cost Allocation

You have the option of entering Job Cost details from either the List tab or the Detail Tab. The Detail tab is easier to read and has the option of selecting employee from the drop down menu or by clicking on Find Employee button.

When processing payroll, you may enter each employee's hours as Job Costing Work Details. This enables you to take advantage of the program's Job Costing reports. Work Details are automatically carried forward into each employee's paycard.

Field Descriptions:

Employee - Enter the employee number, or click on the drop down menu button next to the employee number field to select the Employee number.

Work Date - It may be easier to total the employee's hours for a whole week (or the whole pay period) and make summary entries. Doing this, you may use the pay period end date. If you enter a date that is not within the start and end dates of the active pay period, you will receive a warning message when you save the entry.

Category - Enter the payroll category number, or click on the drop down menu to select the appropriate category. You must assign the entry to an earning or benefit category so that the hours, rate, and dollar amounts may be brought forward to the employee's paycard. If you pick an hourly-based category, the employee's default rate will automatically be shown.

Job Centre - Enter the Job Centre number or click the drop down menu for a list of Job Centres available.  Each entry must be assigned to a job centre. This affects how the amounts are grouped on reports

Cost Centre - Enter the Cost Centre number, or click on the drop down menu to list of all the cost centres available. Each entry must be assigned to a cost centre. This affects how the amounts are grouped on the Job Costing reports.

Hours, Rate, and Amount - The Rate will automatically be set to the employee's default rate when you select the payroll category. If the payroll category you select is not an hourly type earning, you will not be able to enter the rate, but you will be able to enter the amount.

Account and Department - These will automatically be the default account and department specified in the cost centre setup, however they may be overridden if necessary. The account and department affect how the amounts will be summarized when you run the Job Costing Account Summary.

For the Job Costing Work Details report you may select one of the following orders:

• Employee (number)
• Work Date

Setup > Preferences > Job Cost tab

Default job centre and cost centre

Select the appropriate default rate source for data entry.  If the employee rate is always to be used select the first option.  If the Job rate is to be used instead of the Employee rate choose the second option.

Default source of rate for data entry

Customize job cost

Here, you can specify which fields should be visible and/or used by the job cost module.  You can hide fields you don't use to reduce clutter on the screen.