Create an Allocation Driver to move Engineering Salaries from Operating Expense to COGS
The salary expense for all employees will flow to the salary expense account as defined in company setup. There may be a case where you'd prefer some of the planned salary expense to flow to a different account. For example, if wages for the engineering department should flow to COGS rather than OpEx. An Allocation Driver can be used to achieve this.
To create an Allocation Driver to move Salaries from the Engineering Department from Operating Expenses to Cost of Goods Sold, go to Plans > Drivers > Locate the Allocation section and select ... + Add Driver.
Then, populate the Driver as follows:
- Name: Engineering Wages to COGS
- Allocation In: COGS account & department that wages should be allocated in to, e.g., IS - COGS $ - Engineering - Ops Allocation
- Allocation Out: OpEx account & department that wages should be allocated out of e.g., IS - OpEx $ - Engineering - Wage Allocation to COGS
- Amount: OpEx account & department that contains the value to be allocated out, e.g., IS - OpEx $ - Engineering - Payroll Expense
- Allocation Ratio: Portion of the Amount that should be allocated, e.g., a Constant of 1 indicates 100% of the Engineering Wages should be allocated from OpEx to COGS
- Start: Date allocation should begin calculating, defaults to Cutover Date
- End: Date allocation should stop calculating, defaults to Max Date
- Description: Optional text field
This driver will have the effect of moving payroll expenses for the engineering department to COGS from OpEx.
Additional Resource: Allocation Documentation