Applying labour cost at a different rate than employees are paid

Unfortunately, MYOB is not capable of this functionality to help with jobs and overhead allocation.

If your employees are not contractors and not on a casual contract, then their salary would be a fixed cost regardless of whether they do this job or that job. 

ou should gather data from the previous month or quarter or year and see how much you incurred in all the expenses that relate to jobs,that is manufacturing overhead, again excluding admin and marketing. If the office is on the same premise as the workshop then you should come up with a way to split the expenses such as rent and insurance. At best you should create a category called Overhead and all of your utilities, rents, wages, depreciation of machines, and so on, are allocated to this category every time you pay a bill or for instance pay cleaners who clean the job sites. It is important that you do not include administration expenses as they are not related to jobs. This category will give you a good estimate for future period's calculations and allocations of overhead.

After you have a good estimate of how much in these overhead expenses you should incur in the following period including wages ( could be a month or a quarter. Does not matter unless your business has fluctuations in sales during the year. in that case you must use longer periods to even out everything), you divide the total amount by the total number of hours you work to arrive at an OVERHEAD ABSORPTION RATE PER HOUR.

Now go to inventory items and create an item called OVERHEAD ABSORPTION. 

Now imagine you want to invoice a customer for a job of installing CCTV cameras. You include the cameras from inventory, add the next item as labor and the next two-item would be OVERHEAD ABSORPTION, one positive and one negative. If you have worked 10 hours on the job and your absorption rate is 45 per hour, you add one 450 and one -450 to cancel the effect. BUT, make sure that you assign the job to the positive number and leave the job field empty for the negative number. You can use a code like XYZ if you do not want your customer to see OVERHEAD ABSORPTION. Now if you run a report you see that overhead is deducted from your profit. 

It goes without saying that labour hour MAY not be a good basis for allocation and it all depends on the support activities you have such as procurement, inspections and set ups. Talk to your manager and see if tracing these costs and arriving at a more appropriate absorption rate has more benefits than the costs it incurs.

If you want to track costs and improve your processes, I am afraid that the MYOB you are using is designed for small businesses with no such concerns. You should be looking to invest in an ERP or another software that has flexible COST CENTRE functionality

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Hi karen-bomac 

Thank you for your post. You might find the Time Billing function a good way to track this information. You could enter an Activity Slip which will track how much time was spent on each Job, then you can use those slips to create timesheets for the Payruns, but also be able to use it to create invoices for your customers as well.

Here are our Help Articles that explain how Time Billing works:

• Billing for time overview
• The time billing workflow 
• Setting time billing preferences 
• Creating activity slips 
• Creating time billing invoices 

Hope that helps, let me know if you have any further questions.

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