472 Warranty Claim Labor

472 Warranty Claim Labor – Body Shop

Sales

Fixed Operations

Sales Synopsis

Account 472, Warranty Claim Labor – Body Shop, is established to record the sales of Body Shop Labor covered by the manufacturer’s warranty and for which a claim is submitted.

Debits

Credits

Actual selling price (at claim rate) of Body Shop Paint & Labor for which warranty and transportation claims are filed

672 Warranty Claim Labor – Body Shop

Cost of Sales

Fixed Operations

Cost of Sales Synopsis

Account 672 is established to record the Cost of Sales, which is defined as the compensation paid to Body Shop Technicians for Warranty Claim Labor.

Debits

Credits

Cost of Body Shop Paint & Labor for which Warranty and Transportation Claims are filed

Example 1

Record the body shop repair order of $591 for work performed on a factory vehicle. The warranty labor is $150. The parts sale is $410 and the paint and body shop materials sale is $31. The labor cost is $45. The parts cost is $315 and the paint and body shop materials cost is $28.

Journal: Internal

Entry:		Debit	Credit
Account 263	Accounts Receivable – Warranty Claims	$591
Account 672	Cost of Sales – Warranty Claim Labor – Paint & Body	$45
Account 679	Cost of Sales – Paint & Body Shop Materials	$28
Account 680	Cost of Sales – Parts – Warranty Claims	$315
Account 242	Inventory – Parts & Accessories		$315
Account 245	Inventory – Paint & Body Shop Materials		$28
Account 247B	Inventory – Work in Process – Body Shop		$45
Account 472	Sales – Warranty Claim Labor – Paint & Body		$150
Account 479	Sales – Paint & Body Shop Materials		$31
Account 480	Sales – Parts – Warranty Claims		$410

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.