Cost Element Ledgers - Manufacturing

The accounts your production costs are collected in (power, factory labour, factory overhead and the like), with what kind of cost each one is and how it behaves.

When to use it

When you set up product costing, to say which accounts are cost pools worth spreading over what you make.

Before you start

The account group the ledger belongs to must exist.
A cost driver must exist if you want to name one on the ledger.
This is a setup job for whoever owns the chart of accounts and the costing.

Where to find it

Masters > Manufacturing > Cost Element Ledgers.

The fields on this screen

Field (on screen)	What to enter	Required
Code	Short code for this account. Keep it unique.	No
Ledger Name	Name of the account as it should appear in your books and reports. Keep it unique.	No
Account Group (id)	The group this account sits under. It decides where the balance appears in the Balance Sheet or P&L.	No
Is Cost Element	Tick to include spend on this account in the manufacturing cost pools. Untick and it is left out.	No
Element Type (1=material,2=labour,3=power,4=overhead)	Which kind of cost this account carries: material, labour, power or overhead.	No
Cost Driver (id)	The measure this cost is spread by, such as machine hours, floor area or power units.	No
Capitalize to Product	Tick when this cost belongs in product cost. Untick for period costs such as repairs and maintenance.	No
Cost Behaviour (fixed/variable)	Whether this cost stays flat each period or moves with output. Contribution reporting reads it.	No

How it works

The list shows only ledgers already marked as cost elements. Your other accounts are still in the main Ledger master; this screen is the costing view of them.
A ledger added here is also an ordinary account. It appears in your chart of accounts, and you post expenses to it exactly as you would to any other.
The costing run reads what has been posted; it does not create it. When cost allocation is run for a period, it totals the net expense posted to these accounts in that period. It then spreads that total over products, cost centers or work centers, following the allocation rules and the driver.
Element Type decides how the cost is reported in the product cost. Labour is reported as labour. Material, Power and Overhead are all reported as overhead.
Cost Behaviour records whether the pool is fixed or variable, for reading alongside the result.

Tips and common mistakes

An account that is not marked as a cost element never enters the costing, whatever it is named. If a pool comes out empty, check that setting before you check the postings.
Element Type Labour is reported apart from every other type. Use it only for cost you want seen as labour in the product cost, not for every salary that happens to be in the factory.
The period total is whatever was actually posted. An expense entered late, or to the wrong account, changes the product cost for that period.

Ledger and Account Group (the same accounts, from the accounting side)
Production Order, Finished Goods Receipt, Bill of Materials