Cost Accounting Overview/Guide

Introduction

The purpose of this article is to present a summary overview of topics relevant to cost in Rootstock. Topics have an entry "Note See Also - Article Name". This references an article or articles that provide detailed information.

Summary of the setup
 

1. Company Master record and user-defined Dimensions are entered.

2. Division Master record, the cost method is selected. Project Control, as required, is made active.

3. A predefined set of Rootstock predefined Transaction IDs.

4. Item Cost Record.

5. Sub-Ledger Accounts (Division).

1. A transaction is entered or generated.

   1. The Transaction ID is assigned.

   2. The Item Cost is assigned.

   3. The Dimension is assigned.

   4. The Project ID is assigned.

2. A Rootstock Cost Transaction is created.

3. A General Journal Entry is generated from the Rootstock Cost Transaction.

  NOTE  The numbering in the diagram refers to the numbering of the following topics.

Setup for Cost
 

1. Rootstock provides two cost methods. Standard Cost and Weighted Average Cost.

   1. When the Standard Cost method is selected, item standard costs are set periodically and do not change until the next periodic setting. The variance calculation is the difference between the Item’s standard cost and the Purchase or Manufacturing cost. The cost of an item in any transaction is the Standard Cost of the item.

2. With Weighted Cost, each receipt transaction results in a recalculation of the Weighted Average Cost of the transacted item. The format of the calculation is: ((The current value in inventory + the value of the receipt) / (current on-hand quantity in inventory + receipt quantity)).

3. When the Division cost method is Weighted Average, an available option for user-selected purchased items is FIFO (First-In-First-Out) cost. When the Division Cost Method is Standard Cost, the FIFO option is unavailable.

2. Project Control function is active in a Division.

1. Project Master records can be manually entered or auto-generated by the software. In a Division with Project Control active, all transactions require a Project identifier to be assigned.

2. Job Code and Project Charge Code functions provide enhanced functionality to Project Control. The Job Code capability gives additional visibility to the actual cost of work performed. The Project Charge Code is used to classify Project-related transactions. Also, there may be Project costs in addition to Inventory Items. These costs are identified by the name Other Direct Charges (ODC). An example is purchased Engineering Services.

3. General Ledger (GL) transactions are generated from the Rootstock Cost Transaction. The project identifier field is in both the Rootstock Cost Transaction and the General Journal Entry.

• In a Weighted Average Cost Division, this is the weighted average material cost of the Item.

• In a Standard Cost Division, this is the standard cost of the material.

• In a Weighted Average Cost Division, the Item’s Labor Cost is calculated by multiplying the actual hours reported with the employee’s hourly labor rate.

• In a Standard Cost Division, the cost of labor is calculated by multiplying the operation’s Standard Labor Hours with the labor grade rate assigned to the operation.

1. The Inventory Source of Purchased is assigned to items acquired from a Vendor using a Purchase Order. The typical cost elements for these items are Material, Material Overhead, and possibly Freight and Other Landed Costs.

2. The Inventory Source of Subcontract Purchased is assigned to items purchased from a Vendor, and the Purchasing Division may supply some or all of the parts the Vendor requires. The typical cost elements for these items are Material, Material overhead, Subcontract Material, and possibly Freight and Other Landed Costs.

3. The Inventory Source of Manufactured is assigned to items manufactured on a Work Order. The cost of the Manufactured Item is a total of the cost of all the component materials (Purchased, Subcontract Purchased, and Manufactured) issued to the Work Order and the cost of Labor, Labor Overhead, Fringe Overhead, and Machine Overhead used to manufacture the item.