 In this presentation, we will apply overhead to jobs. Get ready, because here we go with zero. Here we are in our job costing company dashboard. We're first gonna take a look at our Excel file to see what our objective will be. We're gonna be over here in the tab EX1.20. EX1.20, if we take a look at the left-hand side in our scenario data, we're gonna be down here on 120 and 130, where we have the indirect labor and assigned to factory overhead. So we're gonna have indirect labor, it's gonna be part of our overhead. All of these items are gonna be overhead as well, indirect materials, factory utilities, and you can think of overhead as being anything that we cannot apply directly to the job for whatever reason, and therefore we need to think about putting it into overhead and then seeing how we're gonna assign it or allocate it to job. Now if you think about a traditional job cost type of system that is typically done by putting this information first into an overhead type of account, so we would first put it into basically an overhead type of account, and then apply it out of the factory overhead using some kind of preconceived allocation basis. So that's what, and if you wanna use that method, it would be kind of similar to what we did with the raw materials, you can think of it as a similar way. So we'll talk a little bit about that as we go, but what we're gonna do here is as we incur the overhead, we're gonna be applying the overhead to the cost of goods sold and to the jobs as we go. So note that if you're talking about something like indirect labor, indirect materials, something like glue or something like that, so you can't apply it to the actual job because that would be too expensive to try to track so that kind of item to a job, then you have to use some kind of percentage method or some type of allocation method to apply it out to the job. And because the jobs are different sizes, you need some type of allocation method to apply it out properly to jobs that have different sizes. In other words, if we have three jobs open, we can't just divide it by three because the jobs may be different sizes. So you need some type of allocation method in order to apply out the overhead to the job. That's gonna be the key, that's gonna be the problem. Now, if you're doing this basically as you go, then you can figure out whatever allocation method you're gonna use. We're gonna be using the just a percentage method, we're gonna say job 14 is gonna allocate 19%, 33% and the 48% for job 16, those three of course, adding up to 100% as we allocate this information out. Now, allocating the overhead is gonna be one of the kind of more complex type of things. There's different methods you could think of to allocate out the overhead, but that's gonna be the general rule, that's gonna be the general concept. We need to then take these indirect items that we couldn't track directly to the job, find some way that we're gonna allocate them out. In this problem, we're gonna allocate them out using these percentages, which are basically predetermined percentages for these projects and as we incur these costs, we will then apply them out to the jobs that are open right now in accordance with these percentages. So for example, if we were taking this first item that we're gonna be applying out, it's gonna be a similar type of process. We have the indirect labor here, indirect labor, we're gonna put it into the cost of goods sold. So this is gonna be labor that we can't apply directly to a particular job. This is someone, possibly a supervisor or someone that works in our warehouse or something like that, that works on all the jobs and we can't really easily assign the time that they work to particular jobs. We're still gonna, in this problem, put it to the cost of goods sold account and then credit the cash account when we pay this individual. However, we're also gonna have to think about how we're gonna break out that cost of goods sold and in this case, we're imagining, we don't know exactly what it is, but we're gonna use some type of allocation method and our allocation method, we're gonna be using these percentages. So we're taking that information and multiplying it times the 19%. So we took that amount and multiplied it times the 19%. Took that amount, multiplied it times the 33% and took that amount and multiplied it times the 48%. So that's the 1,400 times the 48%. And of course, these add up then to the amount that we had put on the general ledger account so that we tie out, which is the 14,000. Okay, so also note that when we're thinking about the indirect labor, we have a similar issue as we did when we had the direct labor. And that is, are we gonna process this through payroll? Are we talking about an employee? If so, are we processing the payroll through our system and do we want to use that? Payroll items as the allocation method or are we going to say that they're contractors and then we pay the contractors, which will be a little bit easier for us to allocate as we pay the contractors. We're gonna use the contractor scenario. You can also use the similar scenario we thought about last time with the direct labor, which is to process the payroll and then record the transaction in a similar fashion as we had done so with the raw materials allocation and apply it out in that fashion. We'll talk a little bit about that again as we go here. But you have those similar kind of concepts when you're dealing with the labor, the potential labor that you're allocating out. The difference between these two labor items are gonna be here that it's indirect. We don't know which job they're working on and therefore we're gonna use that percentage method to do the allocation, rather than us basically knowing where they worked and being able to allocate out directly to the jobs. Okay, so let's do this. We're gonna then go back on over and we're gonna use the same form here. We're gonna go to the plus button up top. We're gonna be using the spend money form. So let's go on down to the spend money form. The money is gonna be spent from the checking account. So we're gonna be taking this out of a checking account and then say, next, I'm gonna say a new contractor. So I'm just gonna call it contractor two this time. So we're paying a contractor. We're gonna assume it's a contractor rather than an employee. Same scenario as before. And then we're gonna say that this happened on, what if the 20th, I think it was, is that right? The 20th that this happened on, let's check it. We're gonna go back over here and say that's the 20th that this has happened. Yes, it is the 20th. Okay, and then we're gonna pick up our item. So now we want indirect. And I don't think we have an indirect set up yet. So what I'm gonna do is add an item as we go. I'm gonna select the dropdown here. Gonna select the dropdown. We're gonna say we want a new item. We're gonna set up a new item as we go. It's gonna be called indirect labor. And then I'm gonna copy that. Gonna paste that in the name. It's gonna be a double-sided item as well. So we want it going to the purchases account. We don't have an indirect labor account set up here. So I'm gonna add one. So I'm gonna add an account. So we're adding an item. And now I'm going here for the purchases side. I'm gonna add an account as we go to. So now we're adding an account. And we're looking for the indirect labor. Note that I jumped over here to the chart of accounts to pick up the number. And I can see the reference number is the 580. I want it to be in that overhead type of area. So I'm gonna pick the 582. So I'm gonna go back on over and we're gonna be picking the 582 for the number. Let's pick that here before I forget. So that's gonna be 582 on the number. The type of account. I'm gonna scroll to the type of account. We want an expense, but we want the direct cost. So it's gonna be a direct cost type of account. And then we're gonna have the name, which is gonna be indirect labor. And you might ask, why is it indirect here? And you call it a direct cost because we're allocating it out to the cost of goods sold. Direct cost is basically the cost of goods sold. And so it's gonna be the indirect labor as a component or part of the cost of goods sold that we're allocating out. So then we're gonna have the description and I'll keep that there. We'll keep it as is and then we'll save this. So this will add the accounts. So I'm gonna add the account. Now we're back to the item. So we added the account up here. So there's the indirect labor. We also need the sales to make it a double-sided or two-sided item. And the sales account is gonna be 4,000 as always. That's gonna be our income accounts, indirect labor in the description. That looks good. So we're gonna say save. So we'll save that. So there it is. That looks good. Now we're gonna pick up the amount. So if I go back on over, we're picking up the amount for job number 14, which is gonna be that 2660. The 2660. So I'm gonna go back on over here and say we want the price to be 2660. So it already picked up the account from the item. Now we're gonna apply it to job number 14 later. We're gonna do that at the end. So we're gonna apply these out to the different jobs and just record this on one transaction form. So once again, indirect labor. So we're gonna say indirect labor. And I'm gonna pick up the second amount now that being for the 4620. So that's gonna be applied to the second job, job number 15. So that's 4620. And there we have that. And let's do this one more time in direct labor. So there we have it. And that's gonna be applied. That's gonna be the amount for the last job, which we had down here at the 6720. The 6720. So I'll pick that one up. So that's gonna be 6720. And there we have it. Now the total then adding up to that 14,000. So that looks good. Now we need to assign them to the job. So I'm gonna say assign to jobs. I'm gonna assign job number 14 first. So let's go to job number 14 to do so. That's gonna be this amount. So that's gonna be assigned. I check it off and then say assign. Then I'm gonna uncheck that one and check the next one. And this one needs to be assigned to job number 15. So we'll search for job number 15 and assign that to job number 15. And then say assign and there it is. Then we'll do this one more time, unchecking this one off and checking off the next one. And this one needs to go yes to job number 16. That's correct. And then we will assign it there. So there's job 14, 15 and 16. Let's go ahead and say then okay. Then we'll see them reflected over here as well, 14, 15 and 16. If we were to record this now, note that it would be decreasing the checking account by that 14,000, we're imagining we're actually paying the contractor at this point in time. Then applying the other side due to the items to the cost of good sold account for the indirect labor specifically and then it's gonna go to the jobs 14, 15 and 16. Now note that if you did process this through payroll, let's say you put this through payroll and you pay this person because they're an employee rather than a contractor. And then you wanted to go back in and assign their time basically to the jobs in accordance with some kind of allocation method. Then you could do so by doing a similar method we did before. I won't complete this, but just to show, we could say all right what this, I'm gonna say negative 14,000 here. And then this side would be going to that wages account. So in other words, wages had already been assigned here. And what we're gonna do is take the expense account out of wages and just simply apply it to the cost of good sold. So the net for the expense account for wages for income wouldn't be different, but it would be assigned to the cost of good sold account and then we can allocate it to the job. That's one way you could process through the payroll without having to assign as you go through payroll. You could process the payroll out and then determine how much of those wages should be assigned out. And again, I think it's probably an easier, less complex method to set up. Once you set up the payroll method up, if it was through payroll, it might be easier than processing. I mean, it might be faster, but I think this method could, that could be a good method to use in any case. So we're gonna say it's a contractor. We're paying the 14,000 like so. Let's go ahead and save this and see what then happens. So we'll record this and hopefully we'll get that green item up top saying that we haven't messed anything up too badly. So we got the green item, so it's green stuff. So now we're gonna go to our balance sheet. Let's go to the accounting dropdown. Let's open up the balance sheet to see what has happened. We're gonna change the balance sheet to the current period. So I'm gonna say, let's take it out to January, 2020, update that report. Then we'll scroll down in the checking account. If we go into that checking account, we should see our transaction scrolling down and there's gonna be our 14,000. So there's our 14,000 transaction here. If I go back up top and I'm gonna go back to the balance sheet and I wanna take a look at the next report which is going to be the income statement. To do that, I'm gonna go up top. I'm gonna hover over the balance sheet, right click on it and I'm gonna duplicate that tab. So now we got the balance sheet to, and this is an extra tab. We don't need this one. I don't need, I'm gonna delete this one. We've got the balance sheet and then we're gonna go to the tab to the left where we will open up the income statement. So we're gonna go to the accounting dropdown and go on down to the income statement. There is our income statement for 2020. If we scroll down through the income statement, we see our indirect labor here. There's the indirect labor for 14,000. Now it's all grouped under cost of goods sold at this point because we put everything under the account type in essence of the cost of goods sold and therefore it's grouped. If you wanna see further subgrouping, meaning direct materials, direct labor and overhead and the indirect labor would then be a subcategory of overhead, we would use the editing layouts. We talked about that a little bit in the past but this is the way you can use a similar type of feature of grouping these together as you would have like subaccounts in something like a QuickBooks type of software. And again, there's frozen cons to either method you're gonna use. Subaccounts can get kinda messy after a while and if you use this method, it might be a little bit more difficult to kinda set up but you kinda have, you can possibly have more actual flexibility to do it with that but then you would need to save. You'd probably wanna be having more custom reports, having internal reports and external reports for the items that you want to be using. So we might look at that a little bit more in the grouping at a later time but that's where it is, I'm gonna go up top now and right click on this tab again, duplicate this tab another time then we're gonna go back to the tab to the left, go scroll back up top and we're looking in the projects. Now let's go into the projects and here's all projects so here are all of our projects. Let's go into job number 15 or project number 15 this time and if we scroll down here's gonna be the activity that we have and we have entered at this point the indirect labor. So here's the indirect labor. If we were to select these three dots we can go to the indirect labor or we can edit basically the ticket that has been created from the money out form that we had filled out. So then let's go to our reports so then I'm gonna go back up top, I'm gonna go to the accounting dropdown and we're gonna take a look at our reports. We're gonna consider our project report so we're gonna scroll down to the project reports and we wanna consider that project detail report. So within the project detail report we can sort then by opened and closed jobs. I'm just gonna select all jobs and then sort this item and then we get all the activity for the jobs. I'm gonna keep this date as of today so I have all the activity down here and then change the dates at a later point in using a different method using the filters. Then I would typically go to the reports over here and I'm gonna say this every time because I think it's important to note if you put the date tab then we're gonna have the date tab and that'll allow us to see the date. Then we could sort by date if we so choose. So it's sorted by job now and then by date so we could see what happened last year as opposed to what is happening this year per job. Then if we wanted to filter down further we could do so with a date ranging filter go into the report settings here for example and then filtering down by date. So we could filter down by date and then if I only wanna see the stuff that happened in 2020 we can then use our date range here and say I would like 2020 stuff please from January and then going out to the end of January. Let's go to the end of January that should do it and then say update and that'll give us our reporting information for the current time period 2020. We then have the 582 currently here if we go to the income statement and scroll to the bottom line we have the 582 as well if we go to the balance sheet and we go to what's in the current earnings there's the 582 as well. So going back to the detail we haven't included all of the overhead items we've only included thus far this 6,720 we'll continue on with it next time and we'll go through these a lot quicker. They're gonna be different overhead items but we're gonna use the same allocation method to allocate them. So remember when you're talking about overhead it could have a whole lot of different things but we're basically using the same method which is gonna be our percentage method. Also just note that you could use different methods to allocate the overhead you could have a different like activity base to allocate there's different you can get into a lot of detail on what's the best method to allocate items for overhead and have your estimates be more exact and whatnot. So, but that's a topic for a different time we're gonna be allocating all the overhead items using the same percentage method here so that's gonna be it for now let's get out of here.