This article explains how Option 2 job costing works for technician hours in Blackpurl. Read this alongside Technician Hour Costing Options in Blackpurl for full context on the available costing options.
How Option 2 Job Costing Works
Option 2 job costing tracks technician labor through Work in Progress (WIP) General Ledger accounts before flowing through to Cost of Goods Sold (COGS) when a service job is invoiced. The key steps in this process are:
All completed job clocking entries are stored on the Customer Order under the Service Job's Technician Time section.
Each job clocking entry generates a journal entry that debits the WIP Labor Inventory General Ledger and credits the WIP Labor Expense General Ledger.
When the service job is invoiced, the labor cost equals the total cost of the job clocking entries. A COGS journal entry is created that credits the WIP Labor Inventory General Ledger and debits the Labor COGS General Ledger.
Any remaining balance in the WIP Labor Inventory General Ledger represents the total cost of completed clocking entries that have not yet been invoiced.
Labor revenue on an invoiced job is always based on the hours billed to the customer at the rate charged to the customer.
The offsetting COGS is based on the hours clocked by the technicians at their costing rate.
Viewing Your WIP General Ledger Accounts
To see which General Ledger accounts your dealership uses for WIP Labor, go to System Settings > Accounting Integration > Control Accounts. Look for the WIP Labor Inventory and WIP Labor Expense fields.
Example: Hours Clocked vs. Hours Billed
The following example illustrates how revenue and COGS can differ when the hours clocked exceed the hours billed to the customer.
A technician clocks 10 hours on a job, but the dealership invoices the customer for only 5 hours.
Labor revenue is calculated as 5 hours at the customer rate.
Labor COGS is calculated as 10 hours at the technician costing rate.
Why WIP Labor Expense Receives the Credit Entries
The WIP Labor Expense General Ledger receives credit entries because of how technician payroll is recorded. When the dealership pays its technicians, that payroll is recorded as a debit to a payroll or wages expense account. The job clocking journal entries reallocate that payroll expense — first to the WIP Labor Expense General Ledger, and ultimately to the Labor COGS General Ledger when the service job is invoiced.