WIP Costs in Fixed-Price Projects: Implementation Activity

The following implementation activity will walk you through the process of configuring an allocation rule for work-in-progress labor.

Attention: This activity is based on the U100 dataset. If you are using another dataset, or if any system settings have been changed in U100, these changes can affect the workflow of the activity and the results of the processing. To avoid any issues, restore the U100 dataset to its initial state.

Story

Suppose that the SweetLife Fruits & Jams company needs to process projects in accordance with the GAAP matching principle—that is, the expenses related to the revenue have to be recorded to the same financial period as the revenue even if the expenses have been already posted to the system. Acting as SweetLife’s administrative user, you will configure an allocation rule that can temporarily allocate the project labor costs to a work-in-progress account group. To reverse the costs back you will not use the allocation rule.

Configuration Overview

In the U100 dataset, the following tasks have been performed for the purposes of this activity:

  • On the Enable/Disable Features (CS100000) form, the Project Accounting feature has been enabled to support the project accounting functionality.
  • On the Account Groups (PM201000) form, the WIP account group has been created; the 12400 - Work in Progress account has been mapped to the account group.

Process Overview

You will configure an allocation rule for work-in-progress labor on the Allocation Rules (PM207500) form.

System Preparation

To prepare to perform the instructions of the activity, launch the MYOB Advanced website, and sign in to a company with the U100 dataset preloaded; you should sign in as system administrator by using the gibbs username and the 123 password.

Step: Configuring an Allocation Rule

To configure an allocation rule used for allocating work-in-progress labor costs, perform the following instructions:

  1. On the Allocation Rules (PM207500) form, create a new record.
  2. In the Summary area, specify the following settings:
    • Allocation Rule: WIP_FP
    • Description: WIP allocation
  3. In the left pane, add a row for the allocation rule step with the following settings:
    • Step ID: 10
    • Description: Labor
  4. In the right pane, on the Calculation Rules tab, specify the following settings for the step selected in the left pane:
    • Allocation Method: Allocate Transactions
    • Create Allocation Transaction: Selected
    • Select Transactions (Selection Criteria section): Not Allocated Transactions
    • Account Group From (Selection Criteria section): LABOR
    • Account Group To (Selection Criteria section): LABOR

      Based on this setting and the previous setting, with this step, the allocation rule processes only transactions of the LABOR account group.

    • If @Rate is Not Defined (Rate Settings section): Set @Rate to 0
    • Quantity Formula (Calculation Settings section): =[PMTran.Qty]
    • Billable Qty. Formula (Calculation Settings section): =[PMTran.BillableQty]
    • Amount Formula (Calculation Settings section): =[PMTran.Amount]
    • Description Formula (Calculation Settings section): ='WIP allocation transaction'
  5. In the right pane, on the Allocation Settings tab, specify the following settings of the step selected in the left pane:
    • Post Transaction to GL (Transaction Options section): Selected
    • Reverse Allocation (Transaction Reversal section): Never

      A fixed-price project with a progress billing rule does not use allocation transactions for billing so you will not use the allocation rule for creating of reversing allocation transactions.

    • Account Origin (Debit Transaction section): Replace with 12400 - Work in Progress

      With this setting, the system generates an allocation transaction that debits the specified account—that is, the 12400 - Work in Progress account, which is mapped to the WIP account group.

    • Account Origin (Credit Transaction section): Debit Source
  6. Save the created allocation rule.

You have configured the allocation rule that can be used for allocating work-in-progress labor expenses of a cost-plus project. To allocate the expenses of a project by using this rule, you need to assign the rule to the project tasks. To review how a project is being allocated by using the allocation rule, complete WIP Costs in Fixed-Price Projects: Process Activity.