463 Internal Labor - Mechanical

Sales

Fixed Operations

Sales Synopsis

Account 463 is established to record the amount of Internal Labor performed by the Mechanical Department.

Debits

Credits

Internal selling price of servicing new vehicles in addition to factory specifications
Internal selling price of reconditioning used vehicles
Internal selling price of installing and removing accessories, optional equipment, tires and special bodies
Internal selling price of dealer policy work
Internal selling price of repair and maintenance of company-owned vehicles
Internal selling price of maintaining used vehicles in salable condition

663 Internal Labor - Mechanical

Cost of Sales

Fixed Operations

Cost of Sales Synopsis

Account 663 is established to record the Cost of Sales, which is defined as compensation paid to technicians for Internal Labor Sales.

Debits

Credits

Cost of mechanical labor sold to other departments

Example 1

Record an internal repair order for reconditioning to a used truck that is in inventory in the amount of $400. The internal labor is $300 and the part sale is $100. The cost of labor is $90 and the part cost is $80.

Journal: Internal Sales

Entry:		Debit	Credit
Account 241	Inventory – Used Trucks	$400
Account 663	Cost of Sales – Internal Labor - Mechanical	$90
Account 681	Cost of Sales – Parts – Internal	$80
Account 242	Inventory – Parts & Accessories		$80
Account 247A	Inventory – Work in Process – Mechanical		$90
Account 463	Sales – Internal Labor – Mechanical		$300
Account 481	Sales – Parts – Internal		$100

Note:

It is recommended that whenever practicable labor sales be costed on actual basis because material losses of productive time may be concealed by the inaccuracies inherent in percentage costing methods. Such inaccuracies can result from failure to update costing percentages when changes occur in the compensation of technicians and in the structural of selling prices of labor, and other reasons.

Assure that Repair Order templates, and accounting are set up correctly by the DSP and maintained whenever technicians have payroll changes. Technician incentives or bonuses should be considered cost of labor sales and debited to A/C 665 and 675 as applicable. However, holiday, vacation, and sick pay should not be charged to Cost of Labor Sales, but as a non-productive wage expense in A/C 24 - Absentee Compensation.

Before closing each month, assure that the balance in A/C 247 - Work in Process, matches the total cost of labor on open (unclosed) R.O.'s, any difference should be adjusted to A/C 665 or 675 - Labor Adjustment.