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Computing Inventory Burden Rates

This section explains what happens when you compute inventory burden rates for the following:

  • Expense inventory abbreviation account/organizations
  • Asset inventory abbreviation WIP account/organizations
  • Raw material inventory abbreviation account/organizations, if applicable

In order to populate inventory burden rates, run the Compute Inventory Burden Rates utility in Costpoint Projects. Use the Manage Inventory Projects screen in Costpoint Inventory to assign inventory abbreviations, organizations, and accounts for expense WIP burden, asset WIP burden, and raw material burden to inventory projects.

Expense WIP Burden

In Costpoint Cost and Revenue Processing, include burden amounts in the value of inventory by including expense inventory abbreviation account/organizations in the base of the burden cost pools. Next, run the Compute Inventory Burden Rates screen to populate the inventory rates.

Burden applied to manufacturing orders (MOs) for expense inventory abbreviations is included for average actual inventory valuation only. The inventory abbreviation forces WIP and finished goods (FG) account/organizations to be the same for each cost element on an expense finished goods inventory abbreviation, so that no posting of direct or burden dollars will be done when the MO is relieved, unless it is relieved to a different expense inventory abbreviation than what it was built on. In this case, only the direct costs will be posted.

Asset WIP Burden

In Costpoint Cost and Revenue Processing, include burden amounts in the value of inventory by including asset inventory abbreviation WIP account/organizations in the base of the burden cost pools. You will also need to run the Compute Inventory Burden Rates process in Costpoint Cost and Revenue Processing in order to process and populate the inventory rates, as burden is capitalized as charges are made to the WIP account/organizations. The Inventory Journal process does not need to capitalize WIP.

Burden applied to Asset MOs is included for average actual inventory valuation, but is also credited to the MO WIP asset relief account/organization when these items are relieved. This account/organization combination is defined for each inventory project on the Accounting tab of the Manage Inventory Projects screen in Costpoint Inventory.

Raw Material Burden

The Raw Material Burdening option is defined on the Configure Inventory Accounts screen in Costpoint Inventory. Raw material burdening can be disabled, applied upon receipt/acceptance, or applied when material is issued.

If raw material is burdened on receipt, you must also include burden amounts in the value of inventory by including the raw material's inventory abbreviation material account/organization in the base of the burden cost pools. Cost Pools are set up in Costpoint Cost and Revenue Processing, and you can access raw material inventory abbreviation material accounts/organizations (Material Account and Material Organization fields) in the Inventory Abbreviations subtask of the Manage Inventory Projects screen.

If raw material is burdened upon issue, Costpoint calculates burden costs for material (if the WIP material account/organization has been set up to be burdened) when charged to an MO and includes that cost in the MO.

Whether or not raw material is burdened upon receipt or issue, running the Compute Inventory Burden Rates process capitalizes the allocated burden material costs to the proper account/organization. If raw material is burdened at receipt, Costpoint will need to credit the raw material asset contra account/organization with direct costs and allocated burden when asset material is issued to a charge number, sales order, or manufacturing order. This account/organization combination is defined for each inventory project on the Accounting tab of the Manage Inventory Projects screen in Costpoint Inventory.

If you plan to set up multiple asset inventory projects, you can set up default MO WIP asset relief and raw materials asset contra accounts and organizations on the Configure Default Project Inventory Accounts application in the Inventory Controls menu of Costpoint Inventory.