Costing Process

Costing Process

After running the payroll processes, you start the post-run process, Costing. The Costing process accumulates results for transfer to the General Ledger and other applications. This process sorts the run results in accordance with the information you have selected from the Cost Allocation flexfield at all levels, by the following:

Examples of the cost allocation of payroll results and of the distribution of employer charges over selected employee earnings appear in the following table.

If your installation also includes Oracle General Ledger, run the Transfer to the General Ledger process after you have run the Costing process. This transfers the results from the Costing process to Oracle General Ledger.

Example of Payroll Costs Allocation

The following table displays payroll run results for four employees, using accounts and work structures identified using the Cost Allocation key flexfield. The example Costing Process Results table illustrates how the Costing process allocates these payroll results to:

Sample Payroll Results
Employee Cost Center Product Line Salary Wages Overtime Union Dues
Employee 1 Production H201 100%   1,000 400 20
Employee 2 Sales H305 100% 1,500      
Employee 3 Production H201 50% H202 50%   2,000 600 30
Employee 4 Sales H305 20% H310 40% 1,000      

The following table illustrates the allocation of costs from these sample run results.

Example Costing Process Results
Account Code Production Sales H201 H202 H305 H307 H310
Salaries   2,500     1,700 400 E400
Wages 3,000   2,000 1,000      
Overtime 1,000   700 300      
Union Dues Liability 50            
Example Costing Process Results (continued)
Account Code Results
Clearing Account contains balancing credits for earnings Salary, Wages and Overtime, and balancing debits for deduction Union Dues

Example of Employer Charge Distribution

When you give links for elements representing employer charges and the costable type Distributed, the Costing process distributes the employer charges as overhead for each employee over a set of employees' earnings. This example shows how employer payments totalling 100 dollars are distributed over a set of earnings including wages and overtime, for the cost center Production and the product lines H201 and H202.

Overhead Distribution for the Production Cost Center

Total paid to Production Cost Center as Wages run result: $3,000.00
Total paid to Production Cost Center as Overtime run result: $1,000.00
Total for Earnings types specified for Distribution: $4,000.00
Ratio for Wages distribution, Production Cost Center = 3000/4000 = .75
Wages overhead = Pension Charge 100 x .75 = 75.00
Ratio for Overtime distribution, Production Cost Center = 1000/4000 = .25
Overtime overhead = Pension Charge 100 x .25 = 25.00

Overhead Distribution for the Product Lines H210 and H202

Total paid for Product Line H201 as Wages run result: $2,000.00
Total paid for Product Line H202 as Wages run result: $1,000.00
Total paid for Product Lines H201 and H202 as Wages: $3,000.00
Ratio for Wages distribution, Product Line H201 = 2000/3000 = 0.6667
Product Line H201 overhead = Total Wages overhead $75 x .6667 = $50.00
Ratio for Wages distribution, Product Line H202 = 1000/3000 = 0.3334
Product Line H202 overhead = Total Wages overhead $75 x .3334 = $25.00
Total paid for Product Line H201 as Overtime run result: $700.00
Total paid for Product Line H202 as Overtime run result: $300.00
Total paid for Product Lines H201 and H202 as Overtime: $1,000.00
Ratio for Overhead distribution, Product Line H201 = 700/1000 = .7
Product Line H201 overhead = Total Overtime overhead $25 x .7 = $17.50
Ratio for Overhead distribution, Product Line H202 = 300/1000 = 0.3
Product Line H202 overhead = Total Overtime overhead $25 x .3 = $7.50
Table: Distribution of Overhead Over Cost Center and Production Line Totals
Account Code Cost Center - Production Product Line H201 Product Line H202
Wages 3,000 2,000 1,000
Employer Liability Distribution 75 50 25
Overtime 1,000 700 300
Employer Liability Distribution 25 17.50 7.50