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:
Overhead Pool: This field is used to specify the cost center total to be processed in incurred overhead applications. This field is left empty if overhead pools are not used. Totals of transactions without overhead pools are calculated for overhead applications to cost centers for which overhead pools are not specified.
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.