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What is standard cost?
In Ajera, standard cost is the expected cost of a salaried employee, not the actual cost (which is called effective cost).
Differences between standard and actual costs are called variances. With standard cost, the variance goes to the Payroll Variance account.
Ajera uses standard cost for costing and billing by default.
Here is an example of how to calculate the standard cost of a salaried employee:
What is effective cost?
In Ajera, effective cost is the actual cost of a salaried employee, not the expected cost.
With effective cost, Ajera corrects the variance between the standard cost and the actual cost when you run payroll.
Before you run payroll, the project and general ledger information reflects standard cost. When you run payroll, Ajera calculates the effective cost rate and replaces the standard cost in the project and general ledger information with effective cost.
If you process payroll in-house or with a payroll service, you can use effective cost for costing, billing, or both if a project requires it.
Here is an example of how to calculate the effective cost of a salaried employee:
How does Ajera handle standard cost and effective cost in billing?
You can bill some projects at effective cost and other projects at standard cost in Ajera, depending on the project requirements.
What are the different billing workflows?
Standard cost and effective cost billing require different workflows.
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