Effective Cost vs Payroll Variance
KB Article #:
98296
Summary:
Effective Cost vs Payroll Variance
Description:

How is the P&L affected with the use of Effective Cost versus Payroll Variance?

Resolution:
Using the effective costing, the salary cost is being tracked by the actual hours worked per pay period. So the cost rate of a salaried employee will vary based on the actual hours entered in a pay period.
 
How does it affect the Project?
  • If using effective costing, then the time entered against the project can't be billed, if the payroll haven't been run.
How does it affect the Profit & Loss Statement and Ledger?
  • With the standard costing, if the time entered of an employee is over/under the standard hours of the pay period, running payroll will create an entry to the payroll variance account to adjust the cost amount to match the salary amount of the employee.
In effective costing, the cost rate will automatically adjust once the payroll has been run, based on the hours entered for the pay period. The salary amount will be divided by the total hours worked during the pay period. It will not create a payroll variance entry in the ledger.
Visit Ajera Learning Center to more about Effective Costing. 
 
Details  
 
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