Production Setup
Production Settings, Machines with their rate per hour, Expense Types, and who may see labour cost.
Set these up once, in this order, before the first production entry: access rights, Production Settings, Machines, Expense Types. Finished items need a bill of materials; it fills the materials of each production entry.
1. Access rights
Ask your administrator to grant the Production screens to the user groups that need them, in Access Rights: Job Orders, Item Assembling, Machines, Expense Types, Production Settings, Expense Distribution and Production Reports. Users log out and in again to see them.
Who may see labour cost
Labour cost reveals what people are paid, so it is shown only to user groups that have the Labour Cost screen. Ask your administrator to tick Labour Cost → Visible in Access Rights for those groups (for example, Accounts and the production manager), and to leave it off for the others.
| With Labour Cost | Without it | |
|---|---|---|
| Rate and amount of employees and temporary staff on a production entry | Shown, and the rate can be changed | Hidden: the rate shows Worked out on save; the cost is worked out when the entry is saved |
| Outside labour (rate or lump sum) | Shown | Shown |
| Labour, Book cost, Unit cost, Full cost on the cost summary | Shown | Shown as — |
| Machine rate on a production entry | Can be changed | Taken from the machine |
| Labour hours and cost report | Hours, average rate and amount | Hours only, with the note Labour cost hidden: you have no right to see it |
| The Labour Cost screen | In the menu | Not in the menu |
The Labour Cost screen
Menu: Production → Labour Cost. A read-only list of employees or temporary staff (switch with the buttons) with their Monthly pay and Rate / hr. Monthly pay is the earnings HR Setup pays as additions: the basic salary and the fixed allowances. Rate per hour = monthly pay ÷ the standard hours per month in Production Settings.
| Code | Name | Monthly pay | Rate / hr |
|---|---|---|---|
| EMP01 | Ahmed Salem | 4,800.00 | 23.0769 |
| EMP02 | Ravi Kumar | 3,120.00 | 15.0000 |
Labour Cost: 4,800 a month ÷ 208 hours = 23.0769 per hour
2. Production Settings
Menu: Production → Production Settings. One form for the whole company.
| Field | Meaning |
|---|---|
| Labour absorbed account | Credited with the labour of employees and temporary staff when a production entry is posted. Payroll debits the salary expense as usual; this account takes back the part that went into stock. |
| Outside labour account | Credited with outside labour (contractors, day labourers). Empty: the labour absorbed account is used. |
| Machine absorbed account | Credited with machine cost, unless the machine has its own account. |
| Cost of sales account (fallback) | Used by Expense Distribution when an item has no cost of sales account of its own. |
| Standard hours per month * | The hours an employee's monthly pay covers (more than 0, at most 744; 208 when first opened). Rate per hour = monthly pay ÷ these hours. |
Production Settings: four accounts and the standard hours
3. Machines
Menu: Production → Machines. A machine (work centre) is anything whose time you want to charge to production: a filler, an oven, a press, a whole line. Each has a rate per hour; a production entry charges hours × rate.
- Click Add Machine.
- Machine: Code (letters, digits, - and _), Name, Arabic Name, Branch, Production line, Active.
- Cost per hour: choose the Fixed asset the machine is (only assets still held are listed, not disposed or sold ones), the Planned hours per month (176 when first opened: 22 days × 8 hours), and any Other cost per hour such as maintenance. Or type a Typed rate per hour, e.g. for a leased machine.
- Electricity (optional, used by Add electricity on a production entry): Power (kW), Tariff per kWh, Has its own meter, Electricity expense account.
- Accounts: Machine absorbed account — empty uses the one in Production Settings.
- Save.
How the rate per hour is worked out
The Rate per hour panel shows the sum live while you type:
| Line | Example |
|---|---|
| Asset value (purchase value + additions − deductions) | 36,000.00 |
| × depreciation % = yearly depreciation | × 10 % = 3,600.00 |
| ÷ 12 = monthly | 300.00 |
| ÷ planned hours = depreciation per hour | ÷ 176 = 1.7045 |
| + other cost per hour | + 0.5000 |
| = Rate per hour | 2.2045 |
With a Typed rate per hour, the asset lines turn grey and the typed rate is used instead. With no asset and no typed rate, the rate is the other cost per hour.
| Rate per hour | |
|---|---|
| Asset value | 36,000.00 |
| × 10% = yearly depreciation | 3,600.00 |
| ÷ 12 = monthly | 300.00 |
| ÷ 176 hours = depreciation per hour | 1.7045 |
| + other cost per hour | 0.5000 |
| = Rate per hour | 2.2045 |
A machine linked to its fixed asset: 2.2045 per hour
- A machine with Has its own meter needs a tariff: A machine with a meter needs the electricity tariff.
- A machine used on production entries can't be deleted; untick Active instead. Inactive machines aren't offered on new entries.
- Changing the rate later doesn't change entries already saved: each machine line keeps the rate it was given when it was added.
4. Expense Types
Menu: Production → Expense Types. An expense type is a period expense you want to share over production at month end: factory rent, power, maintenance, admin, branding…
- Click Add Expense Type.
- Enter Code, Name and Arabic Name.
- Choose the Default basis — how the bill is shared between production entries (table below).
- Choose the Default treatment: Add to stock cost or Report only.
- Tick Admin or selling cost for admin, marketing, branding and other non-production costs.
- Under Accounts, click Add Account for each expense account the type collects. A distribution reads the period's bill from these accounts.
- Save.
| Basis | Shares the bill by | Good for |
|---|---|---|
| Output quantity | Quantity produced by each entry | Similar products |
| Machine hours | Machine hours on each entry | Factory rent, power, maintenance |
| Labour hours | Labour hours on each entry | Supervision, canteen |
| Material value | Value of materials used | Storage, handling |
| Production cost | Book cost of each entry | General overheads |
| Typed share | Amounts you type per entry | Special cases |
| Account | |
|---|---|
| 6310 · Branding and advertising | 🗑 |
An admin / selling cost set to Add to stock cost: the IAS 2 note turns into a warning
The IAS 2 note
The note Under IAS 2, admin and selling costs (e.g. branding, marketing) can't be included in stock value. is always shown under the fields, in blue. When Admin or selling cost is ticked and Add to stock cost chosen, it turns amber as a warning. Saving is still allowed — the company's accountant decides — but the usual choice for such costs is Report only.
| Expense | Suggested treatment | Why |
|---|---|---|
| Factory rent, factory power, machine maintenance | Add to stock cost | Production overheads belong in the stock value |
| Head office admin, branding, marketing | Report only | Not production costs: they stay expenses of the period, and appear in full cost only |
- At least one account is needed: Choose at least one account. The same account added twice is kept once.
- An expense type used on expense distributions can't be deleted; untick Active instead.
Set up production costing
This video will show: who may see labour cost, Production Settings, a machine with its rate per hour from the fixed asset, and expense types with the IAS 2 note.