Overhead Allocation Methods in SyteLine: Configuration Guide
Overhead allocation in SyteLine distributes indirect manufacturing costs—facility expenses, equipment depreciation, supervisory labor, and utilities—to production jobs based on configurable absorption rates. The allocation method directly impacts product costing accuracy, job profitability visibility, and financial statement integrity. SyteLine supports work center-based absorption using fixed and variable rates, giving manufacturers flexibility to match their overhead model to actual cost behavior.
Work Center Overhead Rate Configuration
SyteLine's primary overhead allocation mechanism operates at the work center level. Each work center in the Work Centers form (Production > Work Centers) has fields for fixed overhead rate and variable overhead rate, expressed as cost per hour. When labor is posted to a job operation at that work center, the system multiplies the operation hours by the applicable overhead rates and posts the calculated amount to the job's overhead cost elements. The fixed rate covers costs that do not change with volume (rent, depreciation), while the variable rate covers costs that scale with production hours (power, consumables). These rates are typically recalculated annually using budgeted overhead dollars divided by budgeted direct labor or machine hours.
- Set fixed overhead rate per work center in the Work Centers form (fovhd_rate field) based on annual budget / planned hours
- Set variable overhead rate per work center (vovhd_rate field) for costs that scale proportionally with production volume
- Configure the overhead basis in the Work Center: labor hours, machine hours, or both for dual-rate absorption
- Update rates annually after budget approval using the Work Center mass update utility or direct form editing
- Validate overhead absorption by comparing total absorbed overhead (sum of job postings) against actual overhead GL accounts
Activity-Based Overhead Allocation Approaches
While SyteLine's native overhead model is work center-based, manufacturers needing activity-based costing (ABC) can extend the model using overhead cost pools mapped to activity drivers. This approach uses custom tables and IDO extension methods to allocate overhead based on multiple cost drivers—machine setups, material moves, quality inspections—rather than a single labor-hour rate. The overhead cost pool balances are captured in GL accounts and allocated to jobs proportionally based on each job's consumption of the activity driver. This configuration requires custom development but delivers significantly more accurate product costs for complex manufacturing environments.
- Define overhead cost pools in custom tables (Uf_OverheadPool) with pool name, GL account, and total budget amount
- Identify activity drivers for each pool: setup count, material handling moves, inspection hours, or machine cycles
- Capture driver consumption per job using custom fields on the Job Route Operations form or a standalone entry form
- Calculate allocation rates: pool budget / total planned driver units across all expected jobs for the period
- Run a monthly allocation process via scheduled IDO method that distributes pool costs to jobs based on actual driver usage
Over/Under Absorption Analysis
At period end, the difference between total overhead absorbed into jobs (through work center rates) and actual overhead incurred (from GL expense accounts) represents over-absorption or under-absorption. SyteLine does not automatically calculate this variance; it requires a comparison between the sum of overhead amounts in SLJobTrans and the actual overhead GL account balances. Persistent under-absorption indicates rates are too low or volume is below budget. Over-absorption suggests rates are too high or production exceeded budget. Either condition requires investigation and potential rate adjustment to maintain costing accuracy.
- Calculate total absorbed overhead from SLJobTrans where trans_type in overhead categories for the period
- Compare absorbed total against actual overhead from GL account balances for facility, depreciation, and indirect labor accounts
- Compute the absorption variance percentage: (Absorbed - Actual) / Actual to determine if rates need adjustment
- Dispose of the over/under balance at period or year end by charging to COGS or allocating proportionally to WIP, FG, and COGS
- Document the rate review and adjustment process for audit compliance and cost accounting policy adherence
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