Cost Centers are centers where overhead expenses included in product costs such as refectory and cleaning expenses serving to production lines are recorded and aggregated to be transferred to finished products. The Cost Center concept in cost accounting is used in the same way as the Overhead Pool concept in G/L.
Cost centers are used in cost accounting to apply cost accumulated in specific periods through overheads to materials over workstations. Cost center type can be defined as production or service in the LOGO application. Production cost centers are locations of physical production such as cutting and sewing workshops.
Cost centers of service type are locations that indirectly affect product costs due to services they provide to production centers but of which the direct effect on product costs cannot be determined clearly. Refectory, canteen and maintenance centers are examples for such cost centers. Other production cost centers served by such cost centers and the distribution rate indicating their share of costs are specified.
Distribution is performed using Service Distribution option located in the right mouse button menu while the related period is selected on service cost center. This option is used to specify cost centers to which costs will be distributed and the related distribution rates.
Total amounts accumulated on service cost centers are distributed in overhead applications. Service distribution can be performed only for cost centers. Service costs cannot be distributed to other services. For instance, refectory costs cannot be distributed to maintenance/repair center.
Cost centers consist of three panes. The first pane contains the following information in addition to general record information:
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Capacity Unit: The activity measure providing the basis for planned and actual cost calculations to be performed for cost centers.
- Machine-Hour option is used if the production is based on machinery and the capacity is determined using the working time of the workstation related to the cost center.
- Direct Labor Hour option is used when the capacity is determined using the working time of employees of the workstation related to the cost center.
- Production Quantity option is used when the capacity is determined by production quantity.
Distribution Rate: The rate used to determine the share to be taken from G/L accounts to be used during overhead application or from G/L accounts and overhead pools (if applicable).
Cost periods and capacities are defined on the middle pane of the Cost Center window. This field is used to specify the total capacity of the selected cost period in the specified capacity unit. For example, a total production of 500 machine/hours is specified for June on the screen below.
The third pane is used to specify overheads and budget amounts by cost period. The period Capacity is specified on the line if the type of the selected overhead is Activity. The Type field located on this pane indicates that the overhead line is inserted directly or through distribution. When the value of the Type field is Indirect, the related line can be tracked through its service cost center using the Cost Center column.
Previous Costs option located in the right mouse button menu of overhead lines can be used to equalize line budget to actual values of previous periods. Incurred Overheads Application Transactions option located in the same menu is used to list overhead applications performed for the overhead in question in the related period. Overhead application period and rate can be changed.
Cost center definition is used to specify cost periods, related overheads and the Capacity Unit used in cost distribution. Once the cost type is specified, the following information is recorded on the Cost Center window accessed by clicking on "New" button:
Code: The code of the Cost Center.
Description: The name or description of the cost center.
Aux. Code: A secondary coding field used to group cost centers. The aux. code can be used as a filter in reports.
Authorization Code: The authorization code of the Cost Center.
Type: Indicates the type of the cost center.
Status: The field used to specify the usage status of the cost center. The status field has two options: Active and Passive. Records with passive status cannot be used in transactions.
Overhead Pool: This field is used to specify the cost center total to be processed in incurred overhead applications. Defined cost centers are listed, and the appropriate definition is selected. The cost center is affected only by the total amount of the overhead accounts accumulated on the cost center specified on this field. Totals of transactions without overhead pools are calculated for overhead applications to cost centers for which overhead pools are not specified.
Capacity Unit: The operating measure used to apply overheads incurred in the cost center to production. The capacity unit field serving as a basis to calculations in order to obtain real cost values of cost centers contains the following options:
- Quantity
- Machine-Hour
- Direct Labor Hour
The Machine-Hour option is used if the production is based on machinery and the capacity is determined using the working time of the workstation related to the cost center.
The Direct Labor Hour option is used when the capacity is determined using the working time of employees of the workstation related to the cost center.
The Quantity option is used when the capacity is determined by production quantity.
Distribution Rate: Indicates the rate to be applied to total amounts of G/L accounts and related cost centers used in surcharge distribution.
Period information is entered on the middle section of the Cost Center window.
Period Code / Period Description: The name and description of the cost period related to the selected overheads. Defined cost periods are listed on both fields by clicking on "…" icon, and the required period is selected. Approved cost periods cannot be selected.
Capacity: This field is used to specify the total capacity of the selected cost period in the specified capacity unit. The capacity value is entered by the user.
Overhead information is recorded on the lines located at the bottom of the CostCenter window.
Overhead Code / Overhead Description: The overhead code and description to be applied to the cost period. Defined overheads are listed on both fields by clicking on "..." icon, and the appropriate definition is selected. An overhead can be selected only once for the same cost period. The period capacity is specified on the line if the type of the selected overhead is activity.
Overhead Group Code: It refers to the overhead group of the overhead selected in line. When overhead is selected, it is transferred to the field automatically. Overhead costs can be viewed in detail by grouping the overheads. Overhead groups are defined by using Overhead Groups option located under Administration / Definitions menu.
Overhead Unit: The unit specified on the overhead record is transferred into this field, and cannot be changed.
Amount: The cost estimated for the related overhead in the related cost period. The amount value is entered by the user.
Reporting Currency (RC) Rate: The exchange rate of the reporting currency. The Daily Exchange Rates window is opened by clicking "..." icon or pressing the F10 button, and one of exchange rate values is selected. The value read from the daily exchange rates table is automatically transferred into this field.
Amount (RC): The amount calculated in reporting currency. The amount is calculated by the LOGO application by processing the amount in local currency and the reporting currency exchange rate, and transferred into this field.
Activity Capacity: The capacity estimation for the related activity performed in its own unit on the related cost center. Information can be entered on this field on Overhead lines of which the Activity field is selected.
Type: Indicates the overhead line type to be applied to the cost period. This field consists of two options:
- Indirect
- Direct
Lines with Direct type indicate that overhead lines to be applied to periods are added by the user. Indirect lines are automatically generated by the LOGO application using Service Distribution option.
Cost Center: Indirect Overhead lines are used to specify the service center from which overhead lines distributed from service cost centers are transferred to the budget. The content of this field cannot be changed.
Information entered on the Cost Center window is recorded by clicking on "Save" button.
If a cost center is linked to a production order, work order, overhead transaction or incurred overhead application during any cost period, information regarding that period cannot be changed; however, a new overhead line can be added.
Cost Centers are used in cost accounting as centers where overhead expenses included in product costs such as refectory and cleaning expenses serving to production lines are recorded and aggregated to be transferred to finished products. The option is located in the Main Records menu of the Cost Accountingsection. The Cost Center concept in cost accounting is used in the same way as the Overhead
Pool concept in G/L.
Cost Center type can be defined as
- Production
- Service
in the LOGO application. This selection is made on the Cost Center Type field of the Cost Centers window.
Cost centers with Production type are locations where physical production is performed. Therefore, costs calculated in cost centers of production type are directly distributed to products.
Cost centers of Service type are locations that indirectly affect product costs due to services they provide to production centers but of which the direct effect on product costs cannot be determined clearly. Refectory, canteen and maintenance centers are examples for such cost centers.
The options and functions located in the right mouse button menu of the Cost Centers window are:
| New | Used to create a new cost center. |
| Update | Used to change the recorded cost center information. |
| Delete | Used to delete the cost center definition. Only the records with passive status can be deleted. |
| View | Used to view the cost center definition without making changes. |
| Copy | Used to copy the cost center record information to an empty card and to generate quick records. |
Multiple Delete | Used to delete the selected records in batch. | |
Database Extensions | Used for user defined database extension forms. | |
Used to print the cost center information. | ||
| Record Information | Used to display the user who first recorded and last updated the cost center, and the time of these transactions. |
Number of Records | Used to display the number of recorded cost centers. | |
Refresh | Used to display the cost centers window with most current information. | |
Back to Defaults | Used to display the cost centers window with predefined dimensions. |
Physical Loading Transactions
It is an option used to save period loading transactions on overhead basis for cost centers. It is located in right mouse button menu of Cost Center card. In Physical Loading Transactions window, physical loading transactions performed for respective overhead in the relevant term of the relevant cost period are listed.
You can make changes on this list. In order to do so, actual cost of any production order related to the relevant loading transaction must not be sent to G/L. In this case, loading period and rate of the transaction can be changed.
Loading period of indirect lines in the list and loading can not be changed. If these changes are made in any line, sub-lines of changed one are updated accordingly. However, if actual cost of the production order related to the indirect lines is posted to G/L, indirect lines can not be updated.
For example, if a part of the loading transaction performed in June is transferred to July, this transaction is also listed among physical loading transactions that are listed for July period.
Service Distribution
The Service Distribution option is used to specify how total expenses of service cost centers will be transferred to other production cost centers. This option is located in the right mouse button menu of only the cost center period lines with Service record type. The Cost Centers Service Distribution window contains the following information:
Cost Center Code: The code of the production cost center to which overheads of the service cost center will be distributed. Defined cost centers are listed, and the appropriate definition is selected.
In the LOGO application, a cost center can be selected only once in service distribution. Furthermore, a service cost center cannot distribute expenses to another service cost center.
Cost Center Description: The description of the production cost center to which overheads of the service cost center will be distributed.
Defined cost centers are listed on this field, and the appropriate definition is selected.
Rate: Indicates the part of service cost center total overhead to be distributed to the selected production cost center. The total of distribution rates on lines must be equal to 100. Lines without distribution rates are not recorded.
Service distribution information is recorded using "Save" button, and the application returns to the cost center window.
Service distribution is automatically performed and inserted as a line with Indirecttype on the related period of the production cost center when each service cost center is recorded. If the type of distributed overhead is Activity, the activity capacity defined in the service cost center is transferred as default into the related Direct line of the production cost center.