[Sara Sharkey]

I’m curious as to how others are calculating the indirect cost portion of work centers. 

Thanks!

——————————
Sara Sharkey
Senior Accountant
Compax
Salt Lake City UT
——————————

[David Wiser]

The simple answer would be that the calculation for the indirect cost would be similar to the direct cost.  It depends on the bucket of costs you are absorbing into the work center.  The indirect cost is just another bucket of costs to absorb which uses the same absorption methodology as the direct costs (either per unit or per time).  For example, some work centers are more “time” based where you are absorbing labor dollars.  The direct costs are the wages and the indirect costs are the fringe benefits.  If you fringe rate is 40%, you can use that as the indirect rate on the work center card.  Based on your posting setup, you can then direct the wage absorption to wages and the indirect absorption to the benefit accounts.

If your work center is machine unit based, you would need to determine which bucket of costs to use to calculate your direct costs and which costs to include in the indirect cast calculation.  There are a lot of times that the indirect cost is not even used on the work center cards.  Like the calculation methodology, it is as varied as the companies out there.

——————————
David Wiser
President & Lead Consultant
Dynamics Northwest LLC
BCUG|NAVUG Board of Advisors
BCUG|NAVUG Programming Committee
BCUG|NAVUG All-Star
——————————
——————————————-