Question

How does Spectrum treat Percentage Burden and Payroll Overhead in a cost center company? The best way to explain this is to use an example.

Setup Job Details: Job 800 is assigned to cost center 401. It also has a 15% burden, and a 10% payroll overhead set up on it. This job has one phase, 01-0200 with cost types (L)abor, (B)urden, (M)aterials and (O)ther. The phase has no cost center assigned to it.

Employee: My employee has a home cost center of 201.

Payroll Cash Account: My payroll cash account has a cost center of 101.

Payroll Department: This is the information found in the PR Department File.

Cost Centers "Approved" to use: All

Processing Steps

• Create a new pay cycle using: Employee Cost Group: ALL Check Cost Group: 101 Bank Account: 5 (defaulted to this account per setup) Shut off all add-ons and deductions as this makes it easier to reconcile.

• In Time Card Entry, charge 40 hours to job 800, phase 01-0200, cost type L.

• Calculate the pay cycle, print reports and review findings.

Findings

Direct Labor

Direct labor is charged to the job's cost center. The offset is inter-post.

Actual Taxes, Workmen's Comp and Union Fringes (aka Indirects)

The actual taxes, workmen's comp and union fringes will be charged to the job's cost center with an offset to inter-post.

Employer's Portion of Taxes Expanded

Employee's Portion of Taxes Expanded

These amounts are offset by the reduction of the cash outlay to employee, also within the same cost center, 101. In other words, no inter-post entries are needed for this portion of the journal entry.

Percentage Burden Calculations

The job was properly charged 15% of direct labor ($1,400 x 15% = $210.00). As we charged the actual burden items to cost center 401, we must also credit them out using cost center 401.

Payroll Overhead (% Method)

The job was properly charged 10%. ($1,400 + $210 = $1,610. $1,610 x 10% = $161.00).

Note that the pool of costs that are to be allocated to jobs must also be charged to cost center 401!