The concept of Manufacturing Cost Allocation (MCA) is the functionality that reallocates actual direct and indirect costs from cost centers to Work Centers / Labor Classes into all shop orders processed in an accounting period and finally to manufactured parts inventory value, based on actual reported production in each Work Center / Labor Class.
Such direct and indirect overhead costs are normally allocated in the statistical accounts and cost centers and calculate a new rate for Work Centers and Labor Classes based on the selected allocation factor in the period. Finally, that calculated new rate will be updated all the processed labor and operations transactions and inventory transactions.
Labor Class Allocation Factors, Labor Class Cost Rates, Work Center Allocation Factors and Work Center Cost Rates overview pages are developed to view the each tab details of the Manufacturing Cost by Period page.
This page is used to create a periodic record to calculate the new rates of work centers and labor classes. The record will be created for the site, accounting year, period, and calculation scenario. The relevant cost centers are added manually. Connecting the cost center to the work centers and labor classes is mandatory to use this page.
This function is used to generate work center and labor class records related to the period to the page. Estimate hours, planned hours, actual hours and reported quantity of each work center and labor class will be updated.
Allocation factor is calculated by the system for each allocation base of estimated hours, planned hours, actual hours and reported quantity for each cost center.
Allocation Factor = Work Center or Labor Class contribution / Total hours for the cost center
The facility of adding a manual allocation factor is also given in the Work Center Allocation Factors and Labor Class Allocation Factors tabs. User needs to select the manual allocation base when use the manual allocation factor option.
| Account | Work Center | Cost Type | Allocation Factor % | Total Balance | Allocated Balance | Total Allocated Balance |
| 999001 | WC1 | Machine Cost | 50 | 100000 | 50000 | 50000 |
| 999002 | WC2 | Machine Cost | 20 | 100000 | 20000 | 70000 |
| 999003 | WC3 | Machine Cost | 30 | 100000 | 30000 | 100000 |
These tabs are used to connect statistical accounts with work center / labor class, work center / labor class cost type and the allocation base. Allocation base is the type of allocation factors of actual hours, estimated hours, planned hours, reported quantity, and set rate manually. When user select set rate manually user needs to select manual allocation base for it from the list.
User can add multiple accounts for the same work center / labor class cost type.
This command is used to calculate new rate for each work center / labor class cost type using the account balance for the cost center and the allocation base.
Calculation Logic of the Cost Rate
Get the balance from General Ledger for the accounting period
Get the allocation type for that row
According to the allocation type, get the hours, quantity, or manual
New Cost Rate = (Balance * Allocation Factor / 100) / hours
This command is used to update manufacturing transactions and inventory transactions with the new calculated rate of the work center and labor class cost type of the period from the period start date to up until today. All inventory parts, no matter of inventory valuation method, will have their labor and operation transactions costs adjusted from this command. Closed shop orders for standard cost-controlled parts will get new variance postings, because of increased or decreased of labor or machine cost. System starts with identifying a list of shop orders required. For weighted average controlled parts, inventory transactions for the shop orders in the list will be updated. This process might cascade to higher levels in the manufacturing BOM and update other parent shop orders. Partially received manufactured products will also receive additional WIP during machine and labor transaction cost update, hence the quantity received into stock should be revalued.
Shop orders, that have been closed or partially received, with by-products are also captured by this batch job.
The update of cost for partial receipt is only considered as part of the batch job for update of inventory transactions. A partial receipt will not trigger on-line revaluation of the shop order.
Calculation for unit cost for the open shop orders
(Actual Cost+Expected Remaining Cost) / ((Qty Completed+Remaining Qty) ) = Best guess of actual unit cost
This job is run in the background and new record will be created in the MCA Revaluation Snapshot page for each run. The manufacturing cost by period record will be closed after completed the background job. User can reopen it if the financial period is still open status.
This page is used to run inventory revaluation when user uncheck the update inventory transactions in the assistant page of update processed transactions command. The details of update transactions such as number of processed shop orders, updated date and time and user ID will be updated in this page.