hello everyone , i am struggling with adding non-inventory items on my Production orders . costs like direct labour and manufacturing overheads don’t show up when i add a line on non-inventory items .i am forced to use suspense account so that my inventory costs can be correct but that brings problems as from the suspense account i cannot differentiate between my direct labour cost and my overheads costs .
Please help , i am really struggling to make sense of this .see below
First, understand that non-inventory costs in production orders are not the same as non-inventory items. Non-inventory items are shortcuts for sales and purchase related transactions. Non-inventory costs on production orders are expenses that go into a production order besides input inventory item materials. Read this Guide: Create non-inventory items | Manager.
Second, never use the Suspense account for anything. Suspense is where Manager stores mistakes until you can fix them. Read this Guide: Clear transactions in Suspense account | Manager.
Now, back to production orders. Non-inventory costs are meant for things like outside processing costs. Suppose you are building machinery control panels. Your inventory items on a production item might include sheet steel, switches, gauges, circuit boards, and knobs. But once the layout is complete, with cut-outs punched and holes drilled, perhaps you apply labels on a laser engraver. You have determined that the average cost of laser engraving on your machine is 30 cents per letter. So you add non-inventory costs according to the labels being applied. You post those charges to an expense account you create for the purpose: Laser shop charges. Now the finished cost of the inventory item (the control panel) you place into inventory reflects its true value.
@escobaba - To recover labour via a production order requires an extra P&L account -that is explained in the following topic
Thanks for the speedy responses and i have figured out the direct labour cost recovery issue, i created Direct labour GL account and as i create my production orders a credit amount will reflect on the GL and i will clear the balance at the end of the month to Employee clearing account using a journal. now i am struggling with recovering my depreciation from my production orders as my Manufactuaring overheads includes depreciation but depreciation on Manager IO cannot be Moved with a journal .
Another thing is when i create a production order i use (Materials , direct labour & applied manufacturing overheads) as actual manuafcturing overheads costs will be known later on when the month ends so i am wondering if its ok to create a “manufacturing overheads clearing account” on my balance sheet under Equity and clear any variance remaining on the GL at the end of the month to cost of goods sold ( manufacturing overheads variance GL) as this is the only way that makes senses to me but the challenge of not being able to include depreciation on my production orders will persist.
Thanks again for the quick responses yesterday, i hope you can help with this challenge.
Do you realize that Employee clearing account requires you to enter an employee’s subaccount? If you don’t know who performed the direct labor, you can’t clear the -Direct labor_ account to it. Employee clearing account records amounts owed to specific employees, such as from pay slips.
Yes i do
This doesn’t make sense - recovery of labour costs via the production order has absolutely nothing to do with Employee Clearing account or the need for a Journal.
Are you using the Payslips tab, if yes, then gross earning get posted to the P&L Wages & Salaries account (unless you have renamed). Gross earnings recovered (reallocate to inventory cost) via the production order get posted to a P&L Wages Recovered account as clearly illustrated in the above linked topic.
The Employee Clearing account contains nett earning - the amount to be paid to the employee - therefore it makes no sense to adjust that employee’s payment because of a production order’s gross earnings transfer to inventory cost. The original expense plus the recovery of that expense all belong in the P&L.
If you want to recover depreciation as a separate item on the production order then the process is identical to the gross earning above, a separate P&L recovery account
Why do want to move it with a journal ?
Firstly I would leave the depreciation as a component of the manufacturing overheads recovery factor. At a guess, it would appear that via your production order you are trying to zero out all expenses account (reallocate all costs to inventory) - that is the wrong approach. All expenses remain in their original accounts and the recoveries via the production order get posted to their own accounts, this way you get a read on how the over/under allocations are working. If they are out then adjust future production orders.
That is excellent, but don’t get so bogged down in being overly precise with the manufacturing overheads recovery process, otherwise you are going to be spending a lot of effort getting to exactly the same result (without being so precise) for no tangible benefit.
No its not okay - in fact it would be totally wrong. - you seem bent on creating unnecessary processes as justification for what I am unsure. Set up you P&L accounts appropriately and all can be achieved quite simply.
All expenses go to there natural accounts and the recoveries (transfer to inventories) are shown separately, any profit or loss sub-total on the manufacturing overheads section of the P&L illustrates the under/over recovery of the actual expenses.
There is no challenge as anything can be put onto a production order as long as you grasp the required process.
Yes one can, keep to the basics and don’t create complications where they don’t exist.
Deleted as I posted misinformation…humble apologies.
Should learn to read a bit more carefully. 
@VACUUMDOG’s post is not correct. Checking the boxes circled in red only means the non-inventory items will be available on purchase and sales related documents. It will not make them available on production orders.
How so ?
Non Inventory “ITEMS” can’t be selected within the Production Order.
Non Inventory “COSTS” can be selected within the Production Order.
Non Inventory Items don’t have any relationship with Inventory Items, hence the “NON”
Guys I would like to thank you all , i get it now and @Brucanna I would like to thank you for the images and simple explanations they helped alot . i created my Labour cost recovery via PO GL and Depr & Manufacturing overheads recovery via PO GL and things are running smooth now . I almost went crazy over this .
Thanks again,cheers
