Direct Labor Cost Allocation

Module Guide: Direct Labor Cost Allocation

Module Location

PPIC > Direct Labor Cost > Direct Labor Cost Allocation

Module Objective

The Direct Labor Cost Allocation module is used to distribute or allocate the total direct labor cost (which has been previously calculated) to specific production activities. This process charges labor costs to specific batches or jobs, typically represented by Section Transfer Forms (STF), so that the labor cost becomes part of the Work-in-Process (WIP) value.

1. Main View (Allocation List)

The main page of this module displays a list of all labor cost allocation documents that have been created.

View Explanation

• View: This page is a history of all labor cost allocation processes. You can see the Journal Code, Transaction Date, Allocated COGS (Amount allocated), and Allocation Type.

• Action Buttons:

  • [Allocate Cost]: The primary button to start a new cost allocation process.

2. Steps to Perform Cost Allocation

Step 1: Create a New Allocation Document

From the Main View, click the [Allocate Cost] button to open the Add Allocation form.

Step 2: Define the Period and Cost Source

• On the form that appears, define the time period (SOF Period to Finish Date) for the production activities whose costs will be allocated.

• The system will display a list of Section Transfer Forms (STF) that were completed in that period. These are the "cost objects" or the destination of the cost allocation.

• The system will also display the total labor cost that needs to be allocated (based on the calculation from the Direct Labor Cost Calculation module for the same period).

Step 3: Define Allocation Method and Amount (Important!)

• For each relevant STF, define how the cost will be allocated. You can fill in the Allocation Percentage column or directly fill in the Allocated Amount (IDR).

• Ensure the total cost allocated to all STFs equals the total labor cost available for allocation.

Step 4: Confirm the Allocation

After all percentages or allocation amounts are filled in, click the save/confirm button (not visible). This action will create a journal entry to move the labor cost to the WIP account associated with that STF.

Tips & Important Notes

• This is a crucial step in manufacturing cost accounting for charging labor costs to the correct products.

• This process is usually performed at the end of the month after the total labor cost for the period has been calculated.

• The accuracy of this allocation affects the final WIP and COGM values.

• This module is a crucial work tool for a Cost Accountant.