CPAvsCFA
Newbie
Joined: 29 Dec 2010
Location: United States
Online Status: Offline
Posts: 1
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| Posted: 29 Dec 2010 at 19:18 | IP Logged
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Hello all. I have searched the forum and the internet
and can't seem to find any suitable assistance with the
problem I am facing.
I work for a defense contracting firm and therefore we
have to be DCAA compliant. One requirement is to dilute
the hourly cost of the salaried employees based on the
hours worked and apply the costs to the appropriate
projects they worked on.
For instance if someone gets paid $1000 dollars a week
based on a 40 hour week, then their hourly base rate is
$25/hr. If they worked on 2 projects 20hrs each then
each project would have a labor expense associated with
it of 20*$25=$500.
The problem I am facing is when an employee uses
vacation, how am I to account for that using cost rate
dilution.
Background:
1. Vacation accrued at say 5 hrs/pay period.
2. If an employee leaves the company they get paid their
accrued vacation by taking thier base rate ($25) *
remaining hours
Therefore, going with that same example suppose the
employee works 60 hours that week, 52 on ProjA and 8 of
vacation. Their cost rate gets diluted to $1,000/60 =
$16.666/hr. So the cost that would be applied to ProjA
would be 52*$16.666 = $866.666 and I would apply $133.333
to vacation expense. Thus the sum of all the labor
expenses would equal the total salary of that person.
But what I don't understand is how to apply the vacation
expense that gets accrued each pay period to allow for
accrued vacation to accurately represent the expense that
the company would incur if the employee left the company.
In other words each week the employee accrues vacation
(debit vacation expense, credit accrued vacation) in the
amount of 5hrs * $25/hr = $250. How then if someone uses
vacation, can I (1) accurately allocate the cost
associated with that vacation using the diluted cost rate
for that period (2) accurately reflect the the remaining
accrued vacation to be the amount of hours they have left
* hourly base rate of $25?
I realize I may not have explained this as well as I
think I did, so please let me know how I can help clarify
my situation to better help determine a solution.
Have a Happy Holiday everyone!
__________________
Thanks!
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Topic: DCAA Cost Dilution & Vacation Accting
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