General Overview of the Budget System
The Budget System calculates the expected manufacturing expenses for a given sales forecast using the Cost, PLUS, and Shift Management systems. The sales forecast consists of budget ID's (the level at which sales are budgeted, e.g., style, market group, etc.) which are linked to specific manufacturing ID's in the Cost System. Using these manufacturing ID's, the Budget System determines the amount of raw material, labor, and machine activity necessary to produce the units budgeted in the sales forecast. Overhead amounts are entered into the cost system overhead allocation option. Overhead items, with the exception of payroll related and employee benefits expenses, are not calculated by the budget system. The non-calculated overhead amounts should be budgeted using the same methods you have used in the past.
Two budget-specific sets are established for purposes of generating a budget -- one in the Cost System and the other in the PLUS System. A shift management set is also created during the PLUS set creation. A budget set is established in the Budget System that uses the budget-specific sets in Cost and PLUS to calculate manufacturing expenses. Various reports can be run in the Budget System which detail expected raw material requirements, labor, and machine activity based on the standards which reside in the Cost and PLUS system's budget sets. The Budget System will also generate a Profit & Loss statement and a list of overhead expenses.
After the budget is finalized, the budget set is locked so that no further changes to the set can be made. The cost set used in the budget effectively becomes the mill's inventory cost set for the new budget period.
The first step in the budgeting process under the Budget System is to have the Corporate Cost Administrator create Budget, Cost, and PLUS sets for your location(s). The Cost and PLUS budget sets will be copied from existing sets. A shift management set is also created during the PLUS set creation. As previously stated, the budget set in the Budget System points to the budget sets in Cost and PLUS. Following are instructions for preparing your PLUS and Cost budget sets for use by the budget set in the Budget System. The instructions are listed in the general order in which they should be performed.
1. When entering PLUS for budget set maintenance, be sure to key the budget set ID in the "Std Set" field on the "PLUS System Entry" screen. Once in PLUS, roll to the "PLUS Standards Menu" (Menu PLMENU02).
2. Mill Maintenance (Option 1) - If the plant you are preparing a budget for uses pay slots on the job class file, make sure the proper pay rates are in each slot.
3. Week Parameters Maintenance (Option 3) - The week ending dates for all weeks in the budget period must be set up. If the budget period is a full fiscal year, week ending dates for both calendar years the fiscal crosses (e.g., 1995 and 1996 for FY '96) must be calculated. Instructions for calculating week ending dates are on the screen (PL170R-01).
4. Department Maintenance (Option 11) - Set up any new departments required for the budget which do not exist in the PLUS set from which the budget set was copied. Check for accuracy the training allowance % for each of the existing departments.
5. Job Classification Maintenance (Option 12) - Make sure all jobs to be budgeted are in the PLUS budget set. Set up any which are not in the set. For each job class, check and correct the following: rate of pay, indirect recovery path, budgeted shifts, hours budgeted per shift, and budgeted people. Any direct or direct alternate labor job that is paid hourly must have an hourly rate of pay in the job class file. Do not use a pay slot if the direct or direct alternate jobs are not paid an incentive rate. Budgeted people will need to be added to the direct and direct alternate jobs on screen PL140
6. Oper/Mach Class Maintenance (Option 13) - Set up any new machine type(s) for the budget period. For each machine type, check and correct the following: number of machines, incentive assignment (e.g., 100), power consumption (in HP), square feet (in sq ft), authorized job class, and number of assignable units.
7. Production Constants Maint (Option 14) - Make sure all production constants for any new style(s) are in the file so that cost can be calculated for the style(s). Make sure all jobs have a possibility in the file. some standards in the budget system will not calculate properly if the possibility is not in the production constants file.
All valid shifts for each plant must be set up or modified in "Work with Shifts", (option 1). The user needs to verify the default average hours for each shift by selecting option 5 after entering menu option 1.
The user should also check the shift cycle in "Work with Shifts" using option 8. The shift cycle should include the complete number of day it would take for the shift to repeat.
When the shift cycle has been set up properly, a shift calendar needs to be generated for the new fiscal year. The calendar for each shift can be generated using menu option 2.
The user must override any scheduled days off on all shifts that are not included in the normal shift cycle. These days would include any holidays, vacation, and etc. Overriding normal work schedule may be done in menu option 3, "Work with Shift Calendar".
In menu option 8, "Work with Shifts for Depts", each department must be assigned to the proper shift. When establishing valid shifts for a production department, only one set of valid shifts may be used. For example, if a department primarily works on a four shift operation these four shifts are the only ones that should be set up. If some employees work a slightly different shift, they must be included in the regular four shift rotation. If an extra shift is set up to accommodate the special work hours, it will be included in the production capacity of the department by the budget system.
Menu option 9, "Work with Shifts for Mach Types", should be checked to verify that all machine types have the proper shift hours and number of machines assigned to them. If not shift hours and number of machines can be modified using option 7 and 9 in menu option 9.
1. When entering the cost system for budget set maintenance, be sure to key the budget set ID in the "Std Set" field on the "Mfg Cost System Entry" screen.
2. Add any new manufacturing ID's included in the sales forecast to all appropriate levels of cost. Remember, only new styles need to be added. Existing ID's will have been copied into the budget set from the cost set chosen. Also, add any new formulas if necessary.
3. Update routing sequence and component changes to existing styles, if applicable. Add any new formulas and update existing formulas, if necessary.
4. Update general ledger allocations under option 35. The GL allocations entered in the cost system budget set are the budgeted overhead figures for the budget period.
5. In "Pre-Determined Cost Maintenance" (option 31), cost type PB (pre-determined budget) must be established. The budgeted raw material costs for each raw material type (CTN, FIB, e.g.) must be entered for each component ID (5035, 205072, e.g.) for each budget period. These may be entered in terms of "dollars per unit" in the "New Cost" field or "percent change" in the "Pct Chg" field. Make certain that budgeted material costs are entered for each period in the budget. Press "F9" to display all periods (up to 13). Update the cost in each applicable period as necessary. After updating the first raw material ID's cost for each budget period, "Page Down" or "Roll Up" to go to the next raw material ID. Repeat the previously stated procedure until all raw material ID costs have been updated for all budget periods!
The Budget System
The Budget System has two menus, each of which contains options for specific budgeting functions. The Mill Level Menu is used for security functions performed by the corporate Cost Administrator, as well as for the P & L statement format. For purposes of standardization, Mill Level Menu functions are restricted to the corporate Cost Administrator.
The Sales Forecast Menu is where the majority of the Budget System user's work is performed. The mill's sales forecast (quantity and dollars) for the budget period is entered and maintained from this menu. Budget System reports are generated from the Sales Forecast Menu.
Instructions for creating a budget with the Budget System are outlined below. The instructions focus primarily on the Sales Forecast Menu, where, as previously stated, most of the user's work is done.
The sales forecast for the budget is defined by components called budget ID's. A budget ID is an identifier used to tie to one or more manufacturing ID's in the mill's cost system to a single sales grouping, such as style or market group. Using style, for example, a greige fabric mill may produce a 60/40 cotton/poly print cloth called style 2557 in a variety of widths. Each width of style 2557 has its own manufacturing ID in the cost system. Each manufacturing ID for which sales are to be budgeted must be defined in the sales forecast. At the same time, however, it may be desirable to have all widths of 2557 in the forecast summarized into a single sales component, or budget ID. To accomplish this, a single budget ID representing all widths of style 2557 is created. The budget ID might be named "2557" with description "60/40 Cotton/Poly Print Cloth". After the budget ID is created, the manufacturing ID's of the various widths are defined as components of budget ID 2557. The relationship between a budget ID and its associated manufacturing ID's can be illustrated as follows:
Manufacturing ID's
Budget ID ===> in Cost System
2557 255704600
255704800
255707200
If desired, each width of 2557 in the above example could be budgeted "one-to-one" as follows:
Manufacturing ID's
Budget ID ===> in Cost System
255704600 255704600
255704800 255704800
255707200 255707200
The above examples are not "hard and fast" rules for defining budget ID's. They are only meant to illustrate how the budget ID is used in the Budget System. At some mills, color and finish will be part of the manufacturing ID(s) tied to a budget ID. Other mills will budget by market group or product line as opposed to base style. When budgeting by market group or product line, the individual manufacturing ID's or styles will be assigned to the respective market group or product line budget ID. Basically, the purpose of the budget ID is to allow each mill to budget sales in the same format it has used in the past.
Creating a Budget Using the Budget System
Before you can begin work in the Budget System, the corporate Cost Administrator must create a budget set in the System for you. The Budget System set points to budget sets established in the cost and PLUS systems. The cost and PLUS budget sets must exist before the Budget System budget set can be used (see PLUS System Budget Set and Cost System Budget Set). After the Budget System set is available, you may go to the Sales Forecast Menu and begin preparing your budget.
To access the Budget System, select option "Budget System" on the "Security System - Master Control Menu" (the first menu you see after initially signing onto the system). This will take you to the "Budget System Entry" screen (screen BD00R-01). On this screen, key in the applicable mill, budget set identifier, output queue (where you want your Budget System reports to print), and "Y" or "N" in the "Hold?" field to automatically release or hold your reports, then press "Enter" to go to the Sales Forecast Menu.
Following are explanations of the options on the Sales Forecast Menu. They are listed in the general order in which they would typically be performed:
1. Determine Product Mix (option 1) - Sales history is generally an integral part of planning a sales forecast. Likewise, orders presently on the books can give an indication of what will be produced and sold in upcoming periods. This option allows you to generate a sales history and open order position listing by product ID. When your budget set is created, there are no budget ID's yet defined for the set. The first thing to do after your budget set is created is run this option using the values shown in Figure 1. The number of fiscal periods for sales history (how far back you wish to look) must be defined by the user. If, for instance, "12" is entered, the last twelve months of sales history will be generated.
The initial run of the product mix job as described above will produce a Sales History / Open Orders Exception Listing (BD207R-02). This is a list, in summary form, of sales history by the mill's programmed budget ID's. At some mills this is by style, at others it is by market group. You can determine which is used for your mill by looking in the column titled "Budget ID" on the report. Though this report refers to sales by "Budget ID", no budget ID's are yet actually assigned to the set. The report is simply a list of what has been invoiced during the history periods you selected when you submitted the report. It lists all sales for products which are not yet defined in the budget set. Because no true budget ID's have yet been assigned to the budget set, all sales for the periods selected are exceptions.
After the report is run, it should be given to the person or persons responsible for developing the mill's sales forecast. The Budget System user cannot proceed until the sales forecast (quantity and sales price) by budget ID has been provided.
2. Projected Sales Maintenance (option 2) - After you have been provided the mill's sales forecast, the budget ID's must be defined using this option. Select this option to go to the "Projected Sales Maintenance" screen (BD110R-01). Proceed as follows:
· Press F6 to add a budget ID. This will take you to screen BD110R-02. Note - If a product is to be sold both externally and internally, two budget ID's must be created -- one for the external sales, another for the internal sales.
· Key the first budget ID as stated on the Sales History / Open Orders Exception Listing in the "Budget ID:" field. It is not necessary to key a description into the "Desc:" field as the ID's description will be automatically retrieved from the cost system.
· Key in the first quality sales units and prices by budget period in the "1st Qlt Sales" and "1st Qlt Price" columns, respectively.
· Key the sales budget unit of measure in the "UM" column on the period 1 line only.
· If any second quality or other off quality sales are forecast, state these as percentages of total sales for the budget ID. Key the percentages and sales prices into the respective fields by budget period (e.g., 5% = 5.0).
· If sales for the budget ID are spread evenly by day over the entire budget period, the system allows you to copy the sales information from one period to another period or periods. This eliminates repetitive keystrokes. If, for example, the sales for budget period 2 are the same as budget period 1 (on a daily basis), you can key "1" (for period 1) in the "Copy Pd" field on the period 2 line. Press "Enter" to copy period 1 data to period 2.
· Press F11 to display the "More Data" fields. The fields will appear on the right hand side of your screen.
Following are explanations of the "More Data" fields and the information which must be entered into them:
· Inventory Buildup +/- - budgeted finished goods inventory buildups or decreases must be entered by budget period.
· Service Co/Mill - if the budget ID is a greige component shipped to another Mount Vernon plant for finishing (service mill), the service company and mill must be keyed into the two respective fields. For example, an Alto Fabric greige fabric finished at the Trion Finishing Plant must have "01 23" keyed into the fields provided. When a budget ID specifying a service mill is created in a greige mill's budget set, a corresponding budget ID is simultaneously created at the service mill. A service mill must be in the same division as the greige mill. Valid service mills are established by the corporate Cost Administrator, so the system will not allow you to enter an invalid service mill for a budget ID. The service mill concept is discussed in detail elsewhere in these instructions.
· Mfg ID Mix Pct Limit - the percentage of sales history (in sales units, not sales dollars) you wish to exclude from a budget ID's mix calculation generated in "Determine Product Mix", which will be re-run after budget ID's are created. For example, if you use 1% in the Mix Pct Limit field, the report will exclude all manufacturing ID's which individually accounted for less than 1% of the total sales units for the budget ID during the history periods for which the report was run. Entry is optional, but if no percent limit is entered, every manufacturing ID sold in the history periods specified, no matter how insignificant, will be included in your product mix calculation.
· # Fiscal Pds for Sales Hist - used in the budget ID's mix calculation, this is the number of history fiscal periods you wish to include in the re-run of "Determine Product Mix". For example, if "6" is entered, the sales history "blow-back" will generate history for the last six completed periods and weight the manufacturing ID's accordingly. Likewise, if "6" is specified for a budget ID which has not been invoiced during the last six periods, no manufacturing ID's will be assigned to the budget ID in the mix calculation.
· # Fiscal Pds for Open Orders - same as number of periods for sales history, going forward instead of backward.
· Internal Sales - Comp (Y/N) - for external sales budget ID's, the flag must be set to "N". For non-service mill internal sales budget ID's, the flag must be "Y".
· Internal Sales - Div (Y/N) - for external sales budget ID's, the flag must be set to "N". For service mill internal sales budget ID's, the flag must be "Y". Service mill budget ID's are created automatically and the flag automatically set to "Y" (see section on service mill). Budget ID's for intra-divisional, non-service mill sales must manually be set to "Y".
After the above information has been keyed, press "Enter" to create the budget ID. Press "Enter" again to display the entry screen for the next budget ID. Repeat the above procedures. Once all ID's have been added, you may press "Enter" or F12 to display a list of all ID's. From this list, you may select any budget ID and perform maintenance, if necessary. Otherwise, press F3 to exit the application.
3. Now that budget ID's exist, you should re-run "Determine Product Mix" (option 1) with the criteria shown in Figure 2. This time you will get the following reports:
· Sales History / Open Orders Exception Listing - this report looks the same as the one run the first time, except any budget ID's you created have been omitted from the list. In other words, this is now a list of budget ID's you did not add to your budget set.
· Skipped Budget ID's and Mfg ID's - this is a list of manufacturing ID's that did not meet the mix % limit criterion specified by budget ID in "Projected Sales Maintenance" where you created budget ID's.
· New Product Mix Listing - this is a list of manufacturing ID's that did meet the mix % limit criterion specified by budget ID in "Projected Sales Maintenance" where you created budget ID's. This is the sales forecast product mix.
· New Product Mix Listing for Service Co/Mill - this report is a list of the manufacturing automatically created at the service mill if a service mill was specified for the budget ID in "Projected Sales Maintenance" where you created the budget ID. This report will be generated only if a service mill was specified on at least one budget ID.
Congratulations! You now have a sales forecast and product mix in your budget set! The "New Product Mix Listing" allows you to review the manufacturing ID's assigned to the budget ID's, as well as the percentage (by period) of budgeted sales each manufacturing ID comprises of its respective budget ID. The forecast and product mix are fully maintainable through "Projected Sales Maintenance" and "Product Mix Maintenance", so you can make any additions, deletions, or other changes as needed.
4. Product Mix Maintenance (option 3) - used to add (or delete) manufacturing ID's to a budget ID, or to change the sales mix percentages of manufacturing ID's within a budget ID. After selecting the option, select the budget ID from screen BD120R-01 on which maintenance is to be performed. Press "Enter" to go to screen BD120R-02. Note that "Period 01" is highlighted at the top of the screen, indicating that changes made on this screen will affect the first budget period only. Mix percentages may be changed here. Key in the new percentages and press "Enter" to update period 1 (the system requires that the total mix percentage must equal 100%).
Your mix percentage changes can be copied to other periods from this screen using F7. Key the "copy from" period into the blank preceding the desired "copy to" period(s). Press "Enter" to copy. This method of copying product mixes can be done for only one budget ID at a time. Wholesale copying is more easily performed using the option "Copy Forecast Data by Periods" (see "Copy Forecast Data by Periods" below).
Only manufacturing ID's which were manually added can be deleted. A manufacturing ID automatically updated to a budget ID in "Determine Product Mix" cannot be deleted, but its mix percentage can be changed to zero (0.00) to effectively take it out of the mix..
5. Copy Forecast Data by Periods (option 4) - allows wholesale copying of sales forecast and product mix from one to one or more periods with one keystroke. From the "Copy Forecast Data" entry screen, key the period you wish to copy from into the field preceding the period(s) you wish to copy to. Press "Enter" to update. Remember, when copying from one period to another, the sales forecast (quantities and prices) and the product mix (manufacturing ID's and mix %) is copied in full.
6. Cost of Off Quality Report (option 5) - A second quality unit costs the mill as much to produce a first quality unit. "Cost of off quality" is the off quality sales price/unit minus the manufacturing cost/unit times the number of off quality units budgeted. "Opportunity cost" is the off quality sales price/unit minus the first quality sales price/unit times the number of off quality units budgeted.
7. Projected Sales Listing (option 6) - a hard copy of what has been entered in "Projected Sales Maintenance (option 2). A column for product cost/unit is included.
8. Standard Mfg Profit Report (option 7) - this report takes all sales units for a budget ID (first, second, and other off quality) times the weighted average (adjusted) selling price to calculate total sales revenue. Likewise, total sales units are multiplied by the weighted average standard cost of all manufacturing ID's assigned to a budget ID to calculate total manufacturing cost. The total manufacturing cost is then subtracted from total sales revenue to calculate standard manufacturing profit.
9. Realign Product Mix With Cost (option 8) - this option changes the standard cost that will be used in the budget system. If any changes have been made in the cost or PLUS systems sets assigned to the budget set, you must run this option before changes in cost and PLUS will be reflected in the budget set. This option must be run each time changes are made in cost or PLUS, after you have recosted in the cost system!
10. Save Period 01 To History (option 9) - the Budget System is designed to allow "rolling", or perpetual budgeting. If, for example, a 4-quarter budget is established, at the end of the first quarter, a new quarter can be added to the budget and the first quarter saved to history. This option saves the first period to history.
11. Product Mix Maintenance Report (option 10) - this report lists the current product mix percentages within a budget ID, and the original percentages if different from the current.
12. Detail Product Mix Report (option 11) - this report details how the system generated the mix percentages by budget ID. If you have manually changed your mix percentages, the report will not tie to the percentages you have entered.
13. Generate Labor Complement (option 19) - using the manufacturing ID's defined in the product mix, this option, using cost system routings and PLUS standards, generates the data necessary to calculate the labor requirements for the sales forecast in the budget set. This option must be run before the budget system labor reports will reflect the proper labor complement and cost. Any change to either the cost or PLUS system sets requires that this option be re-run.
14. Labor Complement Detail Report (option 20) - after generating the labor complement, the labor complement detail may be run. This report is sorted by cost system routing steps. This is a very detailed report if run with "Explode Detail" set to "Y". You should first run the report with detail flag set to "N", and from this decide if you wish to explode the detail. You should run "Labor Complement Summary" (option 22, see #16 below) before you run either version of this report. It is not necessary to run this report if you are satisfied with the summary version.
15. Budgeted Machine Type Summary (option 21) - using cost and PLUS, this report shows what the mill balance will be when the budgeted sales forecast is produced. This report shows the number of machines by machine type, budgeted machine hours, machine hours earned, and percent activity, among others. You must verify that the correct machine complement in PLUS is being used to calculate cost. Use budgeted machine hours to verify that the proper shift arrangement is set up in the PLUS budget set. The percent activity on the report allows you to see how well the plant's machinery is utilized to produce the budgeted sales forecast.
16. Labor Complement Summary (option 22) - the summary version of the detail report explained in #14 above. The report can be run by department or by job class. The job class version is more detailed than the department version. Either version shows the dollar amount and number of people earned for the budgeted sales forecast. Also shown are budgeted people, budgeted payroll, overtime payroll, and total payroll.
For direct labor jobs, earned and budgeted people, as well as earned and budgeted dollars, will be the same. They are calculated based on dollars per unit produced as defined in the PLUS system set.
For indirect labor jobs, the earned amount amounts are a function of the units produced. Budgeted amounts are the hours budgeted in the job class file in the PLUS set. As actual indirect labor inherently does not vary with minor changes in mill activity as does direct labor, indirect labor is treated as "fixed" for budget purposes.
Overtime payroll is calculated the same for budgeting as it is in standard cost.
The total mill payroll for the budget is budgeted payroll plus overtime payroll.
17. Generate Material Requirements (option 24) - using the manufacturing ID's defined in the product mix, this option, using cost system components, calculates the direct and indirect material (by material type, e.g., CTN, FIB, DYE, SEW, etc.) necessary to produce the sales forecast in the budget set. This option must be run before the budget system material reports will reflect the proper material quantities and their costs. Any change to either the cost or PLUS system sets requires that this option be re-run.
18. Update Material Req Cost (option 25) - if a budget material price or prices change, it is necessary to make these changes in the cost system budget set (PB). After the changes are made, you must recalculate cost in the cost system budget set, then realign (option 8) the budget system with the new cost. If material price only changed (not quantity), option 25 may be run without having to completely regenerate material requirements in option 24: however, the same result can be achieved by running option 24 again.
Note - after any changes are made to the cost or PLUS budget sets and cost recalculated in the cost system, it is recommended that you do the following from the budget system menu to ensure the budget system set is costed correctly:
1) Realign product mix with cost (option 8)
2) Generate labor complement (option 19)
3) Generate material requirements (option 24)
19. Material Requirements Report (option 26) - a listing of material requirements, both direct and indirect, sorted by raw material type or department/machine class/raw material type. The selection criteria on the submit screen (BD325R-01) allow you to run the report in various formats.
20. Projected Material Expense Rpt (option 27) - lists the projected material expense and quantities by material component by budget period. A grand total for each component is included.
21. Projected Material Waste Rpt (option 28) - lists the projected material quantities introduced, quantities wasted, and percent wasted by material component by budget period. A grand total for each component is included.
22. Intercompany Profit and SG & A (option 29) - entered as percentages at service mills only.
Changes Have Been Made to the Budget P&L Choose Highlighted Area for New Instrucions
23. Profit & Loss Report (option 30) - generates a budget profit and loss statement in the format defined from the budget system Mill Level Menu.
24. Profit & Loss Report Overrides (option 31) - certain items are not calculated by the cost system because they are not components of inventoriable cost. These include, but are not limited to, Claims & Allowances, Discounts & Anticipation, and Customer Freight. The budgeted amounts for these items are keyed into a file for printing on the budget P & L. To key in an override amount, select option 31, which will take you to the P & L Report Overrides screen (BD342R-01). Key "S" into the "Opt" field to the left of the applicable P & L section listed on the screen and press "Enter" to go to screen BD342R-02. On this screen you will see a list of all P & L lines assigned to this section of the P & L. For the P & L line you wish to override, key the units (if necessary), the annual budgeted dollar amount, and the number of budget days into the fields in the applicable columns. The number of days is the number of calendar weeks in the budget period times seven days, minus any schedule adjustment days. Schedule adjustment days are days the mill is scheduled not to run. Press "Enter" to update your entries.
25. G/L Acct Allocation Summary (option 33) - listing of budgeted overhead dollar amounts allocated in the cost system budget set. The report may be run by cost category, by G/L account within cost category, or by department / G/L account within cost category.
Budget System "Service Mill" Application
The "service mill" application is used when a mill's greige product has value added by another mill (service mill). A service mill must be in the same division as the greige mill. In the Budget System, the value added at the service mill is a cost (Contract Finishing) at the greige mill. The quantity "serviced" is production and sales for the service mill.
A service mill is linked to a budget ID at the greige mill in "Projected Sales Maintenance". When this link is established, a budget ID with the same ID criteria (style, units, price, etc.) is created automatically at the service mill. As manufacturing ID's are linked to budget ID's at the greige mill, corresponding service mill manufacturing ID's are assigned to the service mill budget ID. Service mill budget system users cannot perform maintenance on budget ID's which are automatically created via this process. All maintenance must be performed in the greige mill budget system. This security measure was programmed into the system so that greige mill and service mill budget units and cost will remain in sync at all times.
Budget ID's which do not originate from a greige mill must be created and maintained using the methods described earlier in this document. These ID's would typically be created for job finishing by the service mill.
General Ledger Overhead Allocation
The final step in creating a budget in the budget system is to allocate the appropriate weekly overhead amount and allocation percentage by machine type to each G/L account by department if required. The overhead allocation procedures used in the budget system will not be complete or correct until the budget PLUS set has been set up properly and the labor complement has been generated (option 19, on the 'Sales Forecast Menu') in the budget system. Payroll related and employee benefits accounts annual amounts will be calculated automatically. Allocation percentages for % hourly payroll, % hourly employees, % square footage, % horse power, and square feet/horse power combination will be automatically calculated. All other G/L accounts and allocation methods must be manually entered.
Proceed to the 'G/L Allocation Menu' by entering a valid mill and budget set. After obtaining access to the proper budget set, use the roll screen keys to access the 'G/L Allocation Menu'. The following is a list of instructions for using the 'G/L Allocation Menu'.
1. Calculate Allocation Factors (option 19) - certain allocation factors are calculated automatically for the user. Option 19 calculates the allocation factors for the following: '# of Hourly Employees', 'Annual Payroll by Dept - Hourly', and 'Average Hourly Pay Rate by Dept'.
Note: If the allocation factors have been calculated and the user is recalulating allocation factors, all valid PLUS departments will be deleted and recalculated. If you have added overrides to the allocation factors they will be deleted and a calculated value will replace the overide. Also, if a PLUS department has no hourly employees in it any allocation method references will be deleted and must be reentered.
2. Allocation Factors Maintenance (option 1) - option 1 has two levels of detail, cost set specific and non cost set specific. The user should first enter option 1 and not specify a set. When not specifying a set the user will enter variables for such items as FICA percentages, insurance premiums, and etc. Press enter to update these variables. After updating these factors, a cost set should be specified and items which are not system calculated should be entered at the department level. Cost set specific items which must be entered by the user are '# of Salaried Employees' and 'Annual Payroll by Dept - Salaried'.
3. Calculate Allocation Methods (option 20) - some allocation methods used to allocate overhead can be calculated using data in the budget system or the PLUS system. Allocation methods that are automatically calculated are '% Productive Employees', '% Productive Payroll', '% Horse Power', ‘% Horse Power’, and ‘% Horse Power & % Square Feet’. Option 20 calculates these allocation methods for the user.
4. Allocation Methods Maintenance (option 2) - after the allocation methods have been calculated, the user can enter manual allocation percentages that have not been automatically calculated. When a valid cost set is entered, the user views a screen that lists all the departments for which allocation methods have been calculated. If the user wishes to add a department to the allocation methods file, press 'F6=Add Dept'. To add or maintain an allocation method to a department, select the department by entering any character on the left of the screen. The allocation methods that have been created for the department will appear on the screen. To do maintenance on an existing method, select the method, press enter. The current allocation percentages by machine type will appear on the screen. The user may change the existing percentages or add machine types and change percentages.
From the previous screen a manual allocation method may be added. After a department is selected, press 'F6=Add Method' to view the allocation methods that have not been established. Select one of the available allocation methods and select the proper machine types for the department you are working with and enter the desired percentages for each machine type. Repeat the above steps for all departments and allocation methods required.
5. Allocation Account Maintenance (option 3) - each G/L account to be allocated must be added and a method of allocation chosen. After a valid cost set is entered, press 'F6=Add Accounts' and select the G/L accounts to be allocated in the budget set. Press enter and the G/L accounts will be updated in the allocation file. Select each G/L account by entering a character in the left column and press enter. After an account is selected, the valid allocation methods will appear on the screen. Enter the appropriate allocation method number in the space provided and press enter. Repeat the procedure for each G/L account.
6. Calculate Allocation Amount (option 22) - option 22 calculates the annual amounts for the Payroll Related and Employee Benefits G/L accounts.
7. Allocation Amount Maintenance (option 4) - each G/L account annual amount must be entered for accounts not automatically calculated. After a valid cost set is entered, each account that was added in 'Allocation Account Maintenance', option 3 will appear on the screen. If the column 'D' has an asterisk, the annual amounts for this account must be entered by department. To maintain or add an annual amount for a G/L account, select each account by entering any character in the far left column. After selecting an account, press 'F6=Add Depts' to add departments that are associated with this account. Select the departments to be added, by entering a character in the left column and press enter. After the departments have been added, enter the annual amount in the column 'Annual Amount' for each department associated with the account. If an annual amount has been entered for a department, the amount may be maintained by entering the correct amount in the column 'Annual Amount' and pressing enter.
Also, the user may change the machine type allocation percentage by department in option 4. Enter any character in the left column to select the department for which the allocation percentages are to be changed. Follow the instructions in # 4 above to change the allocation percentages. If you make an error and wish to restore the original values from Option 2, field exit all values and press enter.
8. G/L Acct Allocation Summary (option 10) - option generates reports in four levels of detail, cost category, G/L account, G/L account by department, and G/L account by department plus machine type allocation percentages. These reports are used to check data that has been calculated and manually entered in the budget system allocation files.
9. G/L Allocation Change Rpts (option 11) - option generates reports that will show the changes the users have made to the data which was automatically calculated from the G/L allocation menu.
10. Update Mfg Cost System (option 12) - after all data have been entered and checked in the allocation portion of the budget system, the user will move the allocations to the appropriate cost set. Select option 12, enter the desired fiscal year (e. g. 96), and the desired cost set to copy from and the cost set to copy to. During the budget process, the sets selected should always be the same (e. g. From Cost Set ... 3 To Cost Set ..... 3). Press 'F19=Submit Job' to move the data to the cost system. If two different cost sets are selected (e. g. From Cost Set ... 3 To Cost Set ..... C), you will be prompted with this message, Are you sure you want to copy to a DIFFERENT cost set?? __ (Y or N). If you answer yes, you will be allowed to select all GL accounts or select GL accounts to update in the to cost set. After GL accounts are selected, press 'F19=Submit Job' to move the data to the cost system. Warning: The use of the copy to a different set is to update the payroll tax and employee benefits GL accounts after a wage increase. You will be changing the cost in the set you choose to copy to. The user will be instructed when to update these GL accounts.
11. Copy Factors Between Sets (option 22) - allows the user to copy allocation factors from one budget and cost set to the same budget set and a different cost set (e.g. copy from budget set 6 cost set 6 to budget set 6 cost set 2).
12. Copy Methods Between Sets (option 23) - allows the user to copy allocation methods from one budget and cost set to the same budget set and a different cost set (e.g. copy from budget set 6 cost set 6 to budget set 6 cost set 2).
13. Copy Accounts Between Sets (option 24) - allows the user to copy GL allocation accounts from one budget and cost set to the same budget set and a different cost set (e.g. copy from budget set 6 cost set 6 to budget set 6 cost set 2).
14. Copy Amounts Between Sets (option 25) - allows the user to copy allocation amounts from one budget and cost set to the same budget set and a different cost set (e.g. copy from budget set 6 cost set 6 to budget set 6 cost set 2).
After completing all copy functions from one cost set to a new cost set, the user must repeat allocation instruction steps 1 through 12 for the new cost set.
Please contact Danny Erskine with any comments, questions, or suggestions about this web page.