In Acumatica Manufacturing, is it possible to configure variable overhead GL postings to use the same WIP subaccount as the related Production Order, instead of the subaccount defined on the Overhead Code?
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Variable Overhead Posting to Production Order WIP Subaccount
Best answer by PaulMainard55
Interesting question.
The short answer is no. The WIP account on the production order likely is derived either from the Stock Item you’re making or manually overridden on the production order.
The subaccount on the “Overhead” code is generally used to apply a department’s overhead costs to WIP inventory. The GL Account (and its subaccount companion) from the Overhead code and is typically assigned to contra-expense account (e.g., Applied Overhead) to indicate how much of a department’s overhead expense has been absorbed into inventory. Inventory is typically department agnostic.
I’d like to understand the use case on this a little better. It’s not customary to split balance sheet accounts across multiple reporting segments via subaccounts, and, as a recovering CPA, it’s not typically a practice I would endorse when setting up manufacturing for a client. With that said, if you could share your requirements with us, we might be able offer an alternative solution for you.
+4Interesting question.
The short answer is no. The WIP account on the production order likely is derived either from the Stock Item you’re making or manually overridden on the production order.
The subaccount on the “Overhead” code is generally used to apply a department’s overhead costs to WIP inventory. The GL Account (and its subaccount companion) from the Overhead code and is typically assigned to contra-expense account (e.g., Applied Overhead) to indicate how much of a department’s overhead expense has been absorbed into inventory. Inventory is typically department agnostic.
I’d like to understand the use case on this a little better. It’s not customary to split balance sheet accounts across multiple reporting segments via subaccounts, and, as a recovering CPA, it’s not typically a practice I would endorse when setting up manufacturing for a client. With that said, if you could share your requirements with us, we might be able offer an alternative solution for you.
Thank you for the detailed explanation.
Understood on the standard design and accounting best practice. The customer’s requirement is driven purely by internal reporting and reconciliation, where they want applied overhead postings to use the same WIP subaccount structure as the Production Order. At this point, we were mainly looking to confirm whether this can be achieved natively
+6That would be great feature if the Overhead (and labor) could use the subaccount from the production order WIP Account similar to how sales order types or Posting Classes do it,
+4
Thank you for the detailed explanation.
Understood on the standard design and accounting best practice. The customer’s requirement is driven purely by internal reporting and reconciliation, where they want applied overhead postings to use the same WIP subaccount structure as the Production Order. At this point, we were mainly looking to confirm whether this can be achieved natively
I’m actually curious as to use case behind the requirement. When you say that the requirement is “driven purely by internal reporting and reconciliation”, what kind of information are they trying to gleam from their WIP Account’s subaccount structure, and what are they trying to reconcile their WIP against?
We obviously respect the need for confidentiality if the requirement is proprietary and something you can’t share, but it strikes me that perhaps that they might not using the right tool for the job.
The design and use of subaccounts is a topic near and dear to my heart and am inclined to bore people to tears 🙄 with my thoughts on their related “best practices”. I’ll spare you that for now, but if you want to slide into my DMs, to discuss further, please feel free to do so. 😊I’d love to help you find and suggest alternate solutions.
In my view, if we’re looking for a workaround to meet an accounting allocation requirement that isn’t supported, there’s a good chance we’re probably going down the wrong path.
+4That would be great feature if the Overhead (and labor) could use the subaccount from the production order WIP Account similar to how sales order types or Posting Classes do it,
I’d love to get your thoughts on why you think this is a good idea. From an accounting perspective, I see very little utility here, and probably a misapplication of the feature, but admit I can be a bit myopic on this topic 🤔. DM me if you’re interested in diving a little deeper with me. 😊
+6I could see this on labor if being able to compare departmental payroll labor vs. production accrued (earned) labor - which has been asked for a number of times. I guess if you are allocating your overhead by department , it would make sense to have the production accrued overhead so you could see if the production overhead was fully absorbed. I have seen clients create labor and overhead codes with specific subaccounts for each workcenter - usually when they are required by the government. Acumatica did add departments for work centers in 26R1 which might accomplish similar results.
+4Thanks for your thoughts
I guess - but since WIP is an Asset account, with dollars passing through to inventory, why do I care what’s in WIP by department, or product line for that matter? It’s just a pass-through account for costs to flow through on its way to FG inventory. I do not recommend splitting FG Inventory by product line on the balance sheet - I can get that by Item Class if that’s important to me.
Also - “Accrued” Labor for manufacturing shouldn’t be a thing. What we’re really talking about is “Applied Direct Labor”, which should be a contra-account to Direct Salaries and not a liability account. This is the correct way to look at manufacturing labor (IMHO), regardless as to the costing method (standard or ‘actual’). It’s a measure of efficiency and utilization; the same goes for “Applied Overheard”. I’ve seen “Accrued Labor” set-up as a Liability in MFG training demo data before, which generally is incorrect.
Regarding setting-up labor and department codes with specific subaccounts for each work center - I’m a huge fan and is the approach I recommend to clients specifically to measure utilization and absorption. If my client is tracking manufacturing labor (and OpEx) by manufacturing department that’s nicely contained by Work Center, you can bet we’re creating a labor code and overhead code for each work center.
I don’t think that it’s necessary to have departments in the Work Centers per se; merely understanding the relationship between the work center and its corresponding department subaccount value should be sufficient.
+6I agree about keeping subaccounts confined to P&L accounts. But I have run into clients where the finance person wants to have WIP by department because the parent company uses SAP and that’s how they do it. Sometimes they will make every department a site and want to have each operation in that site a separate BOM level!. Decades ago, we had a 7 level BOM for a combo wrench because the cost accountant wanted to know what each step costs. We flattened the BOM and fired the cost accountant.
+4I agree about keeping subaccounts confined to P&L accounts. But I have run into clients where the finance person wants to have WIP by department because the parent company uses SAP and that’s how they do it. Sometimes they will make every department a site and want to have each operation in that site a separate BOM level!. Decades ago, we had a 7 level BOM for a combo wrench because the cost accountant wanted to know what each step costs. We flattened the BOM and fired the cost accountant.
😂😂😂😂
Those pesky parent companies…
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