Planning a Cost Classification System

In Project and Job Costing, you use cost categories, cost types, and cost classes to create a cost classification system that supports your cost-reporting needs. Each cost category is associated with a cost type, which is further characterized by a cost class.

The following overview describes how cost-related setup records affect the processing and reporting of cost transactions.

Categories

Cost categories let you organize contract and project costs according to your company's particular needs. For example, you can create categories that distinguish costs by department (such as design), or by activity (such as painting or wiring), and you can create as many categories as you require.

You add category records to your Project and Job Costing system using the Categories form. Then, you can assign these cost categories to individual projects, and use them to estimate and track costs for projects within a contract. You can create generic categories to use in many projects, or you can set up specific categories for particular projects.

Categories define the following settings for cost transactions that use a given category code:

• Cost Type

• Unit Of Measure

• Billing Type

• Overhead Type

• Labor Burden Type

• Item Number (for item invoices)

To each category you set up, you assign a cost type.

Cost Types

Cost types let you refine your cost reporting beyond the finite set of cost classes that come with the program.

You can define as many different cost types as you need to organize labor, material, equipment, subcontractor, overhead, and miscellaneous costs into meaningful groupings for the projects your company undertakes.

For each cost type you set up, you must assign a cost class. Because they identify the type of resource for each cost type, cost classes are the most basic cost classification in Project and Job Costing. They help to define the character of each cost category and, therefore, of all cost transactions associated with the categories.

The cost types you assign to categories and resource records must use cost classes consistent with the resource. (In other words, equipment records must use cost types that have an equipment cost class.) Therefore, you should create at least one cost type record for each cost class (labor, material, equipment, subcontractor, overhead, or miscellaneous costs).

You can assign the following cost classes to cost types:

• Labor

• Material

• Equipment

• Subcontractor

• Overhead

• Miscellaneous

Resources

You also set up records in Project and Job Costing for each type of resource that you use to perform the work to complete standard projects. These resource records, which are used in estimating projects and in processing cost transactions, are as follows:

• Employees

• Equipment

• Miscellaneous Expenses

• Overhead Expenses

• Subcontractors

• Charges

Resource classifications provide an additional means of organizing your cost reporting system. For standard projects, you can assign resources to projects, to estimate and track costs by resource.

When you enter cost transactions, such as timecards, equipment usage, material usage, and material returns transactions, you can select only resources for which you have created a record.

Note that you must assign to each resource a cost type that uses a cost class consistent with that resource. For example, you can assign to an equipment record only a cost type that uses an equipment cost class.