Material Overhead Application
You can optionally define material overheads (material overhead cost elements -- as many as required, and have that additional cost be included in the average unit cost. You can associate material overheads to items on an item-by-item basis. Also, you can define default material overheads to apply to selected categories of items or all items in your organization.
Specifically, you can charge material overhead when you perform any of the following three transactions.
- deliver items from receiving inspection to inventory
- complete assemblies from WIP to inventory
- receive items being transferred from another organization and deliver to locator
For PO receipts (delivery from receiving inspection) and interorganization transfers, the material overhead amount earned is added to the PO cost/transfer cost of the item (but held as a separate cost element) when it is delivered to inventory. For assembly completions, the material overhead amount earned is added to the cost of the completion in inventory but is not charged to the job.
Deliver from Receiving Inspection
The accounting entries for material overhead on deliveries from receiving inspection are as follows:
| Cost group MOH account @ MOH cost
| XX
|
|
| Material overhead absorption account
|
| XX
|
Complete Assemblies from WIP
The accounting entries for material overhead on completion transactions for standard discrete jobs are as follows:
| Cost group MOH account @ MOH cost
| XX
|
|
| Material overhead absorption account
|
| XX
|
Receipt from Intransit (Standard or Project Org.) into Project Org (FOB Receipt)
The accounting entries for material overhead when you transfer items from a standard or project organization to a project organization using an interorganization transfer transaction are as follows:
| Cost group MOH account @ MOH cost
| XX
|
|
| Material Overhead Absorption account
|
| XX
|
Defining Material Overhead
Material overhead is applied at the rate or amount at the time of the transaction and on hand balances are not be revalued when the rate or amount of a material overhead is changed.
Customers will define material overheads for projects in the same way they do in non-project average cost organizations. You can define as many material overhead subelements as desired and base their charging in a variety of ways: by item, activity or lot, or based on total value.
In the Item Cost window, you can associate material overhead(s) to items and define the rate/amount manually using the average rates cost type. This definition applies across all cost groups within an organization. Once defined, the material overhead(s) are applied whenever the particular item is involved in an applicable transaction. These overheads can be changed at any time; making a change affects future transactions, but has no impact on the current unit cost in inventory.
See Also
Defining Material Overhead Defaults
Defining Item Costs
