657B – Adjustment – Cost of Labor Sales

Body Shop Department

Cost of Sales Synopsis

Account 657B

Debits

Credits

  1. The wages paid to productive employees on Body Shop repair orders for whom there is no offsetting revenue or charge to expense (unapplied labor).

1.  Adjustments to work in process to reconcile work in process or adjust above.

 

Remarks:

These accounts should be used only by retailers having their own body and paint operation .

 

Productive body and paint labor should be controlled through Work in Process – Labor (Account 247).

 

Unapplied labor represents a failure to supply the technician with a sufficient amount of productive work; and is a reflection against the Service Department.

 

Effective time-keeping procedures should be followed and periodic productivity and efficiency studies conducted.

 

When productive body and paint employees are paid for time on the premises for which no productive labor was performed, this pay is considered unapplied time and should be charged to this account  This does not include vacation and time-off pay, or non-productive pay which is chargeable internally to an expense account.  Simply stated: unapplied time is the amount of body and paint employee’s compensation which has not been billable to a repair order.

 

When productive employees are paid on a flat-rate basis, with a guaranteed minimum wage, the difference between the total amount earned on productive labor and the guaranteed wage should be charged to this account.

 

Minimal differences between the monthly book and physical inventories of labor in process should be debited or credited to this account.

 

If abnormal unapplied labor continues to exist, it may be an indication of inefficiency and should be promptly investigated and analyzed.