Project Setup

The setup for WIP projects differs in some respects from the setup of other types of projects. Some of the similarities and differences are noted.

On the Basic Info tab of the Manage Project User Flow screen, the Project Classification for WIP projects must be Work In Process. The available classifications are pre-set in Costpoint. There is no rule for the Project Type; it can be any designated type, but for clarity you may want to call it Inventory or Manufacture to distinguish it from other projects. Establish project types on the Manage Project Types screen.

Establish an account group specifically for WIP projects on the Manage Project Account Groups screen. This group should include asset accounts, designated as project-required on the Manage Accounts screen, and is used to collect the project costs. These accounts are capitalized on the balance sheet until they are transferred via the COGS journal entry. They must point to asset lines on the financial statement setup. Examples of these are Labor, Other Direct Costs, and Inventory. On the Manage Project Account Groups screen, designate these accounts with a Function Code of LABOR or NON-LABOR, as usual. In addition, one account with a Function Code of WIP TRANS OUT and one account with a Function Code of COST GOODS SOLD must also be in the group. The purpose of the WIP TRANS OUT account is to credit the WIP assets from the balance sheet. This account must be an asset, project-required, and pointed to an asset financial statement line, such as inventory, to decrease this balance when posted. The COST GOODS SOLD account carries the expense as a debit on the income statement. This account must be a Non-Labor Expense, project-required, and pointed to an expense financial statement line. You must set up the WIP TRANS OUT and COST GOODS SOLD accounts at the level of the project where the COGS formula resides so that the account numbers are available for posting. For billing and revenue recognition purposes, there must also be one account each with the function codes of BILLED A/R, UNBILLED-GENERL, and REVENUE.

The pool debit allocation accounts, which are applying burden to WIP costs, must also be pointed to asset financial statement lines on the balance sheet. This ensures the Net Inventory Balance, as reported on the WIP PSR, matches the inventory line(s) on the balance sheet. Note that if you are not capitalizing the G&A applied to WIP, the debit allocation account for this pool must be pointed to an expense account line on the income statement.

The asset accounts must be included in the bases of any pools from which they are burdened. If you want to apply G&A to COGS, the account with the COST GOODS SOLD Function Code must be included in the base of G&A. Note that you must use this configuration only if you are not capitalizing G&A.

Three check boxes on the Configure Project Settings screen relate to WIP projects: Apply G&A to WIP, Capitalize G&A Applied to WIP, and Present WIP G&A on PSR Profit & Loss. You must select these check boxes only to include information on the Project Status Reports. These check boxes affect only what is included or not included in the net inventory balance. See the following bullets for more details.

Establish the Revenue Formula on the Manage Revenue Information screen, as usual. If the formula involves cost incurred, the basis for this calculation is Total WIP Costs. For example, if you are using the Cost Plus Fee on Cost formula and want to recognize an eight percent fee, this fee is applied to Total WIP Costs to formulate the revenue amount. However, for purposes of calculating the profit and profit percentage, the COGS and Burden Applied to COGS, if applicable, is subtracted from Revenue.

Set up billings using the usual method. Transactions with function codes of LABOR and NON-LABOR are still posted to Maintain Open Billing Detail and are eligible for inclusion on the bill. Because the WIP TRANS OUT and COST GOODS SOLD accounts do not populate Open Billing Detail, these are not included on any bills.

When initializing the project's prior years cost on the Manage Prior Year Cost and Revenue screen, enter zero for any Allowed columns (for example, Direct Amount Allowed, Burden Amount Allowed) for the WIP TRANS OUT and COGS accounts. This ensures that no revenue is entered for these accounts. Even though these should negate each other, the Compute Revenue process is more efficient if there are no allowed amounts to consider for these accounts.

On the Configure Project Settings screen, you must set three fields correctly to ensure that the WIP projects are presented properly:

• Apply G&A to WIP: This check box is for informational purposes and serves as a prompt to the other options on this screen. This check box defaults to cleared, which assumes that G&A is not applied to projects that have a classification of "Work In Process." If this check box is not selected, the Capitalize G&A Applied to WIP and WIP G&A Pool Type fields do not apply. Please note that, if you select this check box, the WIP costs are not automatically burdened with G&A. You control how this or any pool is burdened on the Manage Cost Pools screen and subtasks. Even if you do not select this check box, the cost pools still burden the WIP costs if they are set up to do so.
• Capitalize G&A Applied to WIP: This check box is not available unless you select the Apply G&A to WIP check box. When available, this check box defaults to cleared. This indicates the G&A that is applied to WIP projects is not capitalized and, therefore, is subtracted from Total WIP Costs, along with the WIP Transfer, to arrive at Net Inventory Balance. It is displayed on a separate line on the WIP PSR. If you select this check box, the G&A that is applied to WIP projects is capitalized and, therefore, is not subtracted from Total WIP Costs to form Net Inventory Balance. Also, the WIP G&A Pool Type field is not active.
• WIP G&A Pool Type: This field is available only if you select the Apply G&A to WIP check box and do not select the Capitalize G&A Applied to WIP check box. If you are applying G&A to WIP and do not want to capitalize this G&A, it is subtracted from Total WIP Costs, along with the WIP Transfer, to arrive at Net Inventory Balance. You can use this check box to designate which pool type is to be subtracted from Total WIP costs. Without this selection, Costpoint does not know which pools are G&A. Any pool with the pool type designated here, and which is applicable to the project, is subtracted from Total WIP Costs.

Cost of Goods Sold

The setup of the Manage Cost of Goods Sold screen determines the amount that is transferred by the COGS journal entry. Costpoint uses this amount to determine the profit recognized by the WIP project.

As noted in the documentation for this screen, you can select one of 11 COGS formulas from the Calculation Method drop-down list. Click the following links for more information the formulas.