About Planning a Cost Classification System
You use cost categories, cost types, and cost classes to create a cost classification system that supports your cost-reporting needs. Each cost category is associated with a cost type, which is further characterized by a cost class.
The following overview describes how cost-related setup records affect the processing and reporting of cost transactions.
Categories
Use cost categories to organize contract and project costs according to your company's particular needs. For example, you can create categories that distinguish costs by department (such as design), or by activity (such as painting or wiring), and you can create as many categories as you require.
You add category records using the Categories screen. You can assign these cost categories to individual projects, and use them to estimate and track costs for projects within a contract. You can create generic categories to use in many projects, or you can set up specific categories for particular projects.
Categories define the following settings for cost transactions that use a given category code:
- Cost Type
- Unit of Measure
- Billing Type
- Overhead Type
- Labor Burden Type
- Item Number (for item invoices)
To each category you set up, you assign a cost type.
Cost Types and Cost Classes
Use cost types to refine your cost reporting beyond the fixed set of cost classes that come with the program.
You can define as many different cost types as you need to organize labor, material, equipment, subcontractor, overhead, and miscellaneous costs into meaningful groupings for the projects your company undertakes.
For each cost type, you assign a cost class. Because they identify the type of resource for each cost type, cost classes are the most basic cost classification in Project and Job Costing. They help to define the character of each cost category and, therefore, of all cost transactions associated with the categories.
The cost type you assign to a resource must use a cost class consistent with the resource (for example, to assign a cost type to an equipment resource, the cost type must use an equipment cost class). For this reason, you should create at least one cost type for each cost class.
Cost classes are predefined and cannot be changed. They are:
- Labor
- Material
- Equipment
- Subcontractor
- Overhead
- Miscellaneous
Resources
You also set up records for each type of resource that you use to perform the work to complete standard projects. These resource records, which are used in estimating projects and in processing cost transactions, are:
- Employees
- Equipment
- Miscellaneous Expenses
- Overhead Expenses
- Subcontractors
- Charges
Resource classifications provide an additional means of organizing your cost reporting system. For standard projects, you can assign resources to projects, to estimate and track costs by resource.
When you enter cost transactions, such as timecards, equipment usage, material usage, and material returns transactions, you can select only resources for which you have created a record.
The cost type you assign to a resource must use a cost class consistent with the resource (for example, to assign a cost type to an equipment resource, the cost type must use an equipment cost class).