How Distributed Costing Is Calculated

Distributed costing calculation determines how and where incurred costs are distributed.

Many decide to distribute the costs for employer taxes, charges, and liabilities over earnings elements. For example, you might distribute an overhead expense, such as an employer liability over a group of elements that include regular, overtime, and shift pay.

Distributed Costing Calculation Process

These steps explain how the payroll run calculates the cost distribution.

1. The process adds the cost for the distributed element to elements included in the distribution group. It distributes the costs based on the ratio each element contributes to the total amount for the distribution group.

   If an element in the distribution group produces no run results, the application distributes the results to the remaining members.

   Note:

   Costing at the element entry level for an element included in the distribution group uses the costing defined for it, not the costing defined for the distributed element.

2. The process builds each segment of the cost account by starting with the lowest level of the cost hierarchy. When it reaches the element eligibility level, the process applies the rules shown in this table.

   Costing Exists at Element Eligibility Level	Account Numbers Used
   Yes	Numbers specified for the distributed element, in place of account numbers for the segments of the distribution group elements
   No	Numbers derived for the segments of the distribution group elements

For example, suppose the only difference between the costing result for an overtime wage and distributed element is the natural account segment. The account number is 5130 for the overtime wage and for 5220 for the distributed element. The process adds the proportional cost of the distributed element to the overtime wage. It derives the natural account segment as shown in this table.

Costing Exists at Element Eligibility Level	Account Numbers Used
Yes	The process costs the result to distributed element's natural account of 5220
No	The process retains the account number for the overtime wage of 5130

The offset cost results are distributed to all the applicable assignments and the corresponding assignment details are displayed for each record. You can view employee assignment details for offset account of distributed costing in Run Payroll Cost Results report and Costing Results page.

For example, an employee has 2 assignments, Manager and Analyst. The Manager assignment has an earnings element entry of Appliances Base Salary Earnings Results ($5000), and the Analyst assignment has an earnings element entry of VOl Ded1 Results ($200). The employee also has a relationship level element entry Employee Club Contribution Results ($100) with distributed costing. The offset cost results of Employee Club Contribution Results are distributed in the ratio of both assignment earnings and the assignment details are displayed.

The assignment details on the offset side for distributed costing are displayed even in a single assignment scenario.

If you don't want to split the offset cost results in multiple assignments for distributed costing, set the process configuration parameter Date used to split the distributed cost in offset account to a later date. The default date is: 2023/01/01. When you set the date to later, any costing processes submitted after this date will split the offset cost results for distributed costing, and any submitted before this date won’t split. However, the offset is always split when the cost account is different.