Understanding WIP Methods

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09/25/2015

The calculation formulas for each Work in Process (WIP) method are defined in the following table. These are system defined.

WIP method	Calculation formula	Calculation description
Cost Value	Recognized Revenue = Contract Invoiced Price Estimated Total Costs = Contract Total Price x Schedule Cost Ratio WIP Costs = (Percentage of Completion -Invoiced %) x Estimated Total Costs Percentage of Completion = Usage Total Costs/Schedule Total Costs Invoiced % = Contract Invoiced Price/Contract Total PriceRecognized Costs = Usage Total Costs - WIP	Cost value calculations start by calculating the value of what has been provided by taking a proportion of the estimated total costs based on percentage of completion. Invoiced costs are subtracted by taking a proportion of the estimated total costs based on the invoiced percentage. This calculation requires that the Contract Total Price, Schedule Total Price, and Schedule Total Costs be correctly entered for the whole job.
Cost of Sales	Recognized Revenue = Contract Invoiced Price Recognized Costs = Schedule Total Cost x Invoiced Percentage Invoiced % = Contract Invoiced Price/Contract Total Price (Invoiced % exists as column in Job Task Lines) WIP Costs = Usage Total Costs – Recognized Costs	Cost of Sales calculations begin by calculating the recognized costs. Costs are recognized proportionally based on Schedule Total Costs. This calculation requires that the Contract Total Price and Schedule Total Costs be correctly entered for the whole job.
Sales Value	Recognized Costs = Usage Total Costs Recognized Revenue = Usage Total Price x Expected invoicing ratio Cost Recovery % = Contract Total Price/Schedule Total Price WIP Sales = Recognized Sales - Contract Invoiced Price	Sales value calculations recognize revenue proportionally based on Usage Total Costs and the expected cost recovery ratio. This calculation requires that the Contract Total Price and Schedule Total Price be correctly entered for the whole job.
Percentage of Completion	Recognized Costs = Usage Total Costs Recognized Revenue = Contract Total Price x Percentage of Completion Percentage of Completion = Usage Total Costs/Schedule Total Costs (Referred to as “Cost Completion %” in Job Task Lines) WIP Sales = Recognized Sales - Contract Invoiced Price	Percentage of Completion calculations recognize revenue proportionally based on the percentage of completion, that is, Usage Total Costs vs. Schedule Costs. This calculation requires that the Contract Total Price and Schedule Total Costs be correctly entered for the whole job.
Completed Contract	WIP Amount = WIP Cost Amount = Usage (Total Cost) WIP Sales Amount = Contract (Invoiced Price)	Completed Contract does not recognize revenue and costs until the job is complete. You may want to do this when there is high uncertainty around the estimates of costs and revenue for the job. All usage is posted to the WIP Costs Account (asset) and all invoiced sales are posted to the WIP Invoiced Sales Account (liability) until the job is complete.

Cost Value

Recognized Revenue = Contract Invoiced Price

Estimated Total Costs = Contract Total Price x Schedule Cost Ratio

WIP Costs = (Percentage of Completion -Invoiced %) x Estimated Total Costs

Percentage of Completion = Usage Total Costs/Schedule Total Costs

Invoiced % = Contract Invoiced Price/Contract Total PriceRecognized Costs = Usage Total Costs - WIP

Cost value calculations start by calculating the value of what has been provided by taking a proportion of the estimated total costs based on percentage of completion. Invoiced costs are subtracted by taking a proportion of the estimated total costs based on the invoiced percentage.

This calculation requires that the Contract Total Price, Schedule Total Price, and Schedule Total Costs be correctly entered for the whole job.

Cost of Sales

Recognized Revenue = Contract Invoiced Price

Recognized Costs = Schedule Total Cost x Invoiced Percentage

Invoiced % = Contract Invoiced Price/Contract Total Price

(Invoiced % exists as column in Job Task Lines)

WIP Costs = Usage Total Costs – Recognized Costs

Cost of Sales calculations begin by calculating the recognized costs. Costs are recognized proportionally based on Schedule Total Costs.

This calculation requires that the Contract Total Price and Schedule Total Costs be correctly entered for the whole job.

Sales Value

Recognized Costs = Usage Total Costs

Recognized Revenue = Usage Total Price x Expected invoicing ratio

Cost Recovery % = Contract Total Price/Schedule Total Price

WIP Sales = Recognized Sales - Contract Invoiced Price

Sales value calculations recognize revenue proportionally based on Usage Total Costs and the expected cost recovery ratio.

This calculation requires that the Contract Total Price and Schedule Total Price be correctly entered for the whole job.

Percentage of Completion

Recognized Costs = Usage Total Costs

Recognized Revenue = Contract Total Price x Percentage of Completion

Percentage of Completion = Usage Total Costs/Schedule Total Costs

(Referred to as “Cost Completion %” in Job Task Lines)

WIP Sales = Recognized Sales - Contract Invoiced Price

Percentage of Completion calculations recognize revenue proportionally based on the percentage of completion, that is, Usage Total Costs vs. Schedule Costs.

This calculation requires that the Contract Total Price and Schedule Total Costs be correctly entered for the whole job.

Completed Contract

WIP Amount = WIP Cost Amount = Usage (Total Cost)

WIP Sales Amount = Contract (Invoiced Price)

Completed Contract does not recognize revenue and costs until the job is complete. You may want to do this when there is high uncertainty around the estimates of costs and revenue for the job.

All usage is posted to the WIP Costs Account (asset) and all invoiced sales are posted to the WIP Invoiced Sales Account (liability) until the job is complete.

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Understanding WIP Methods

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