Issue/Symptom/Question

• What is seen on the job using PENTA's direct burden functionality?
• Do I need separate Cost Types for burden expenses?
• Distr Type Methods for distributing burden expenses

Applies To

Payroll Direct Burden

Determining which method to use for distributing burden expenses to Jobs

Resolution/Fix/Answer

PENTA has two methods for distributing burden expenses directly to direct labor:

1. Add-on - follows the same charge as the labor
   1. 1 hour of labor is charged to a job, then 1 hours worth of the burden is charged to the same costcode as labor hour
2. Allocate - charges a specific Cost Type and Costcode

Determining which method to use comes down to one major question, "How are jobs estimated?"

• If jobs have a fully burdened hourly rate used to estimate the cost, then use the Add-on method.  This aligns the Estimate with Actual when reviewing the job cost.
  • Example: 
    •  A job has a costcode with an estimate of 10 hours @ $54 per hour (fully burdened rate $40 labor and $14 burden), total of $540
    • An employee charges 10 hours to the same costcode, and the employee earns $41 per hour and has $14 of burden per hour, total of $550
    • The Add-on method keeps the $140 of Actual Burden in the same costcode as the 10 hours of labor charged
      
      
• If jobs have the labor estimated into one costcode and the burden estimated into one or more separate costcodes, then use the Allocate method.  This tells PENTA to take the actual burden expense and apply/allocate to the same costcode(s) that the burden estimate sits in.
  • Example:
    • Same estimate data as above however the estimate is broken into two costcodes 
      • L - 1000 Direct Labor for $400  and  B - 9000 Burden for $140
    • Same actual information as above, however, the Allocate method is used   
      • L - 1000 Direct Labor has $410 actual  and  B - 9000 Burden has $140 actual

The accounting of the expenses would look like this:

• Account 2200 = Payroll Taxes Payable
• Account 5100 = Direct Labor  (linked to Cost Type L)
• Account 5900 = Burden   (linked to Cost Type B)
• Account 8050 = Payroll Tax Expense A   (like FICA)
• Account 8060 = Payroll Tax Expense B   (like FUTA/SUTA/WC)
• Account 8199 = Payroll Tax Applied

Add-on method:

• Labor Distribution:  Debit 5100                         410               (Job OU)
• Labor Distribution:  Credit  Accrued PR                   410         (BS OU)
  
  
• Gross to Net:            Debit  8050                       100                 (Employee OU)
• Gross to Net:            Debit  8060                         40                 (Employee OU)
• Gross to Net:            Credit 2200                                140        (BS OU)
• Gross to Net:            Debit  5100                       140                (Job OU)
• Gross to Net:            Credit 8199                                 140       (Employee OU)

Allocate method:

• Labor Distribution:  Debit 5100                         410                  (Job OU)
• Labor Distribution:  Credit  Accrued PR                   410            (BS OU)
  
  
• Gross to Net:            Debit  8050                       100                   (Employee OU)
• Gross to Net:            Debit  8060                         40                   (Employee OU)
• Gross to Net:            Credit 2200                                140          (BS OU)
• Gross to Net:            Debit  5900                       140                  (Job OU)
• Gross to Net:            Credit 8199                                 140         (Employee OU)

Note:  If the Employee is under one Balance Sheet OU (BS OU) and the Job is under a different BS OU, but the Job and the Employee OUs are Brother/Sister (share a Parent Balance Sheet OU) then inter-company entries are introduced which modifies the entries slightly above.