You enter the important costing information for an element on its links. This means that all elements for which you must maintain costing information must have at least one link, even those that receive entries during the payroll run as indirect results of the processing of other elements.
When defining a link for an element, you select a costable type that determines whether the payroll run should collect the results of this link for costing purposes. By default, a link's costable type is Not Costed. For the results of elements that process in payroll runs to be collected for accumulation and transfer, you must change this default to a costable type of either Costed, Fixed Costed or Distributed.
When processing an element for an employee with a link marked Costed, the payroll run checks for Cost Allocation flexfield entries affecting the employee at every level - payroll, element link, organization, assignment, and element entry. Since earnings types may well receive override entries of information for labor distribution purposes at the lower levels of assignment or element entry, the costable type Costed is likely to be best for the links of elements representing earnings.
When processing elements marked for Fixed Costing, the system looks for costing information at the payroll, element link and element entry levels only, not the assignment or organization levels. You can, in fact, override the account code at element entry level. This is because the order of priorities for Fixed Costing is Payroll (highest priority), Element Link and finally Element Entry (lowest priority).
Suggestion: Deduction amounts are usually irrelevant to labor distribution analyses, so elements representing deductions seldom receive lower level entries of costing information. The costable type Fixed Costing may be best for these elements' links. However, this is optional.
For labor distribution analysis, you can distribute employer charges, such as employer payments for social security or employee benefits, as overhead costs to be added to employees' earnings. The links of elements representing employer charges you want to distribute in this way require the costing type Distributed.
For each employee, Oracle Payroll distributes the run results of elements with this costable type proportionally over a set of earnings types you specify. This distribution set of earnings types could include, for example, Wages, Overtime and Shift Pay. When you select Distributed as the costable type of a link, you must also enter the name of the distribution set of earnings over which the run results of the link are to be distributed.
See: Defining an Element or Distribution Set
For element links whose run results should go to the General Ledger, you enter in the Costing field of the link, the GL account to debit or credit, and in the Balancing field, the account to correspondingly credit or debit.
For earnings types and non-payroll payments, the GL account to debit (for example, Salaries) goes in the Costing field, and the account to credit (for example, Clearing) goes in the Balancing field. For deductions, the account to credit (for example, Union Dues Liabilities) goes in the Costing field, and the account to debit (for example, Clearing) goes in the Balancing field.
When you give links for elements representing employer charges the costable type Distributed, the Costing process distributes the employer charges as overhead for each employee, over a set of employees' earnings.
See: Data Costed at the Element Link Level
This example shows how employer payments totalling $100 are distributed over a set of earnings including wages and overtime, for the cost center Production and the product lines H201 and H202. The table below shows the distribution of overhead over costs and product line totals.
Total paid to Production Cost Center as Wages run result: $3,000.0
Total paid to Production Cost Center as Overtime run result: $1,000.00
Total for Earnings types specified for distribution: $4,000.00
Ratio for Wages distribution, Production Cost Center = 3000/4000 = .75
Wages overhead = Pension Charge $100 x .75 = $75.00
Ratio for Overtime distribution, Production Cost Center = 1000/4000 = .25
Overtime overhead = Pension Charge $100 x .25 = $25.00
Total paid for Product Line H201 as Wages run result: $2,000.00
Total paid for Product Line H202 as Wages run result: $1,000.00
Total paid for Product Lines 201 and 202 for Wages: $3,000.00
Ratio for Wages distribution, Product Line H201 = 2000/3000 = 0.6667
Product Line H201 overhead = Total Wages overhead $75 x .6667 = $50.00
Ratio for Wages distribution, Product Line H202 = 1000/3000 = .3334
Product Line H202 overhead = Total Wages overhead $75 x .3334 = $25.00
Total paid for Product Line H201 as Overtime run result: $700.00
Total paid for Product Line H202 as Overtime run result: $300.00
Total paid for Product Lines H201 and H202 as Overtime: $1,000.00
Ratio for Overhead distribution, Product Line H201 = 700/1000 = .7
Product Line H201 overhead = Total Overtime overhead $25 x .7 = $17.50
Ratio for Overhead distribution, Product Line H202 = 300/1000 = .3
Product Line H202 overhead = Total Overtime overhead $25 x .3 = $7.50
The following table describes the distribution of overhead over cost center and product line totals:
| Account Code | Cost Center | Product Line | Product Line |
|---|---|---|---|
| Production | H201 | H202 | |
| Wages | 3,000 | 2,000 | 1,000 |
| Employer Liability Distribution | 75 | 50 | 25 |
| Overtime | 1,000 | 700 | 200 |
| Employer Liability Distribution | 25 | 17.50 | 7.50 |