464 New Vehicle Inspection Labor

Sales

Fixed Operations

Sales Synopsis

Account 464 is established to record the Labor Sales required to perform new vehicle preparation by the Mechanical Department.

Debits

Credits

Actual selling price (warranty rate times the time allowed on the specific vehicle) of labor performed in conditioning new vehicles per factory specifications

664 New Vehicle Inspection Labor

Cost of Sales

Fixed Operations

Cost of Sales Synopsis

Account 664 is established to record the Cost of Sales, which is defined as compensation paid to technicians, for Labor related to New Vehicle preparation.

Debits

Credits

Cost of mechanical labor performed in conditioning new vehicles per factory specifications

Example 1

Record a repair order for new vehicle inspection in the amount of $107. The labor cost is $19.

Journal: Internal Sales

Entry:		Debit	Credit
Account 261	Factory Receivables	$107
Account 664	Cost of Sales – New Vehicle Inspection Labor	$19
Account 464	Sales – New Vehicle Inspection Labor		$107
Account 247A	Inventory – Work in Process – Mechanical		$19

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.