Organization Costing Rule Components

Use organization costing rules to assign labor costing rules, labor cost rate schedules, and nonlabor cost rate schedules, to business units or specific expenditure organizations.

The schedule type on the organization costing rule determines if the application assigns a labor cost rate schedule or nonlabor cost rate schedule.

The following components work together to determine organization costing rules.

• Business unit and expenditure organization

• Schedule type

• Labor costing rule and cost rate schedule

• Default overtime transaction attributes

Business Unit and Expenditure Organization

If you use organization hierarchies, you can select a business unit for an organization costing rule. You can only select expenditure organizations that belong to the project expenditure organization hierarchy for the selected business unit. If you don't select a business unit for an organization costing rule, you can select any expenditure organization that belongs to any project expenditure organization hierarchy.

You can assign an organization labor costing rule to an organization that isn't classified as a project expenditure organization. In this case, the labor costing rule applies to all organizations that are below the specified organization in the project expenditure organization hierarchy. An exception to this rule is a labor costing rule that you assign directly to an organization at a lower level in the hierarchy.

For example, assume a hierarchy has three organizations: Organization 1, Organization 2, and Organization 3. Organization 1 is the parent of Organization 2. Organization 2 is the parent of Organization 3. Organization 3 is the only organization that is classified as a project expenditure organization. If you assign organization labor costing rules only to Organization 1 and Organization 2, the rule that you assign to Organization 2 takes precedence for Organization 3.

Schedule Type

Use the Labor schedule type to use labor cost rate schedules to calculate costs for labor transactions such as time cards. If you select a schedule type of Labor, you must enter a labor costing rule.

Use the Nonlabor schedule type to use nonlabor cost rate schedules to calculate costs for nonlabor transactions such as miscellaneous or usage transactions. If you select a schedule type of Nonlabor, you must enter a nonlabor cost rate schedule.

If you configured the plan type to use actual rates, the pricing engine also uses these rates for planning, budgeting, and forecasting transactions.

The application uses the organization if it's part of the resource definition; otherwise, it uses the project owning organization. The project owning business unit is always the business unit in the planning flow.

Labor Costing Rule and Cost Rate Schedule

To calculate labor costs, you must assign a labor costing rule to each organization costing rule. You assign a labor costing rule to the organization costing rule. If the labor costing rule has a costing method of Rates, you must also assign a cost rate schedule that defines the hourly cost rates for employees in the selected organization.

The labor costing rules and cost rate schedules that you assign to an organization apply to all employees in the organization.