247 - Work in Process - Labor

Current Assets

Other Inventories

Synopsis

Account 247

Debits

Credits

  1. Technicians’ pay that has been flagged on Repair Orders (offset to Cost of Sales).

  1. The cost of all productive labor sold on completed repair orders, this account is chained to Labor Cost of Sales for each labor type.

  2. The adjustment required when the physical inventory is less than the account balance.

 

 

Remarks:

This is a "wash" account whereby the R.O. debits this account and Technician payroll credits it.

 

Only flagged time sold on Repair Orders should be charged to this account.

 

This account balance represents the cost of all productive mechanical labor on repair orders in process at month-end.  Labor which has been performed but which has not been billed as a sale due to incomplete work, etc., is an asset and should be recognized as such each month-end.

 

Costing and inventory procedures should be carefully reviewed periodically, to preclude unnecessary "build-up" of this asset and possible losses at future date.  Technician labor on repair orders deemed uncollectible should be charged to Adjustment Cost of Labor Sales (Account 657A or Account 657B).

 

Each time technicians are given raises, the appropriate costing within the DMS system should be adjusted for those technicians.

 

Compensation to productive service and body shop personnel for vacations, holidays, etc. should not be charged to this account.  All such compensation to productive service and body shop personnel should be charged to Absentee Compensation (Account 24).

 

Each month-end, this account balance should be in agreement with a physical inventory of incomplete repair orders.  Any variance between the general ledger account balance and the detailed inventory list should be reconciled and adjusted.

 

When technicians are employed on an "hourly" or "guaranteed basis", the amount paid, if any in excess of their productive earnings should be charged directly to Adjustment Cost of Labor Sales (Account 657A or Account 657B).

 

When an individual is employed in a productive and utility capacity (such as porter, used car maintenance, etc.) the productive labor costs should be charged to this account.  Time spent working on other projects for the dealer, for example cleaning the shop floor, should be charged to the appropriate expense account.

Note: