Managing Assets

Assets are purchased for long-term use and are not likely to be converted quickly into cash. Assets are generally divided between tangible and intangible property. Tangible property includes buildings,vehicles, furniture/fixtures, computers, and equipment. Intangible property includes patents, copyrights, and computer software. Fixed assets are not consumed or sold during the normal course of business. In DEACOM, fixed assets are indicated via the Fixed Assets tab on Work Centers and Containers.

Configuration

The following items are required in order to enter and maintain assets in DEACOM:

  • Shop Areas - Shop Areas are sections within a Facility that represent a collection of similar machines/Work Centers. Maintained via Production > Maintenance > Shop Areas.
  • Work Center Types - used to group Work Centers based on common characteristics and filter reports. Maintained via Production > Maintenance > Work Center Types.
  • Maintenance Parts - Parts used to ensure Work Centers are properly functioning and maintained must be created within Item Master. For information on how to create and manage these Parts, refer to Managing Maintenance Parts and BOMs.
  • Units of Measure - used to indicate the unit of measure on the Container record. Maintained via Inventory > Maintenance > Units of Measure.
  • Permission set to Yes for the security settings "Production - edit work center fixed assets" and "Inventory - edit container fixed assets". If users do not have these permissions, they will be allowed to view Work Center and Container records, but they will not be allowed to access or modify the Fixed Assets tab of those records.
  • Accounts - two accounts will need to be created within the Chart Of Accounts for assets to be properly valued. For setup instructions, refer to Configuring the Chart of Accounts.
    • Depreciation Expense account - a depreciation expense account will record the expense from using the asset on the income statement. The depreciation expense account is specified and in the "Depreciation Expense" field in Accounting Options.
    • Accumulated Depreciation account - an accumulated depreciation account will decrease the value of an asset on the balance sheet (this is why it is a contra-account). The accumulated depreciation account is specified in the "Account" field on the Work Center or Container Fixed Assets tab.

Process

A Work Center typically corresponds to a specific machine within a given Shop Area. Work Centers must be assigned to a Shop Area and Shop Areas may contain several Work Centers. Hourly costs of operating machines (not including labor) can be defined on each Work Center record and, in regard to MRO, maintenance expenses and equipment depreciation can also be factored into the cost. The number of hours per day the machine is in operation and the number of Workers needed to operate the machine are also defined at the Work Center level.

Grouping Work Centers

There are two ways to group Work Centers: (1) Work Center Types, which are required to add Work Centers, and (2) Work Center Trees or Families, which are optional. While Work Center Types are used to group Work Centers based on common characteristics, Work Centers themselves may also be used to create families of machines, such as a bottling line in a brewery. The "Parent Work Center" field, available on the Edit Work Center form, allows companies to define a Work Center tree, indicating the different “child” Work Centers that belong to a single “parent” Work Center. In situations where the child/parent relationship is defined, the “Children” field on the MRO pre-filter can be used. The options for this filter are (1) "Exclude", which allows the report to run as it normally does showing the maintenance tasks for only the selected Work Center, or (2) "Include", which allows the report to find all child work centers related to the selected work center (up to 100 levels deep) and displays maintenance tasks for the entire family of Work Centers.

Determining hourly cost and burden factor

Hourly Cost (not including labor) defines the running costs, maintenance expenses, and/or equipment depreciation of a given machine. Calculating the total hourly rate (excluding labor) for a particular machine generally involves (1) equipment cost per hour of operation, (2) overhead cost per hour, and (3) the machine-specific hourly rate.

  • For the equipment portion, a common formula is: [(machine purchase cost + expected lifetime maintenance cost) / expected hours of operating life]
  • For the overhead portion, a common formula is: [(average machine cost per hour + labor and overhead cost per hour) x markup]
    • In DEACOM, the overheard cost per hour is handled by the “Burden Factor” field, discussed below.
    • Overhead costs typically include any costs not directly involved in machining a part, which includes costs for administrative staff salary, equipment, furniture, building lease, maintenance, office supplies, etc.
    • It is generally easiest to calculate annual costs of the above variables then divide by total labor or machine hours for the year.
    • Hourly rates can be calculated as a general shop hourly rate (via the formula above) or an hourly rate based on a specific piece of equipment.
  • For the machine-specific portion, a common formula is: [(specific machine(s) cost per hour + labor + overhead cost per hour) x markup]

It is important to note that the above is somewhat simplified and usually a work in progress as factors may change.

In addition to hourly cost, a burden factor may be defined on each Work Center. This factor is designed to be used in the burden calculation on Item Masters, where the default is 1. The goal of the factor is to allow for the same Operation used on different Work Centers to have different results based on the defined burden calculation. If rolling up burden without the calculation defined, the burden cost should be the operation burden multiplied by pieces per hour (as it has always been). If not rolling up burden with the calculation defined, the calculation will calculate with simply the item master fields available (like it does now).

Adding assets in DEACOM

The processes below represents the best practice for creating and maintaining assets within DEACOM.

Adding a Work Center

  1. Navigate to Production > Maintenance > Work Centers.
  2. Click "New" to open the Edit Work Center form and complete the General tab.
    1. Enter the appropriate information in the "Name" field. Additional information may be entered in the "Description" field.
    2. Enter a grouping via the "Parent Work Center" or "Work Center Type" fields, described above, and assign it to a Shop Area.
    3. If known, enter the Manufacturer, Model Number, and Serial Number of the machine.
    4. Using the formulas listed in the "Determining hourly cost and burden factor" section or a more appropriate formula, calculate and record the "Hourly Cost" and "Burden Factor" of the Work Center.
    5. Enter and desired notes regarding the machine, check the "Default" flag if this is the default Work Center used, and ensure the "Active" flag is checked so that Workers may utilize this machine when entering production.
  3. Navigate to the Fixed Assets tab and enter acquisition and depreciation details.
    1. If known, enter the Acquired date (the date the asset was purchased) and Acquisition Cost. Regarding the cost, the general rule is to include all costs necessary to get the asset ready to use, up to the point it is put into service, including installation, freight costs, and sales taxes.
    2. To post depreciation costs to the GL, select a Depreciation method, Account, and enter the appropriate number of Months. For more information, refer to the Depreciating Assets page.
  4. Navigate to the Maintenance tab and assign Maintenance Tasks to ensure the machine operates smoothly and efficiently. For more information, refer to Creating Maintenance Tasks.
  5. Once all pertinent information has been entered, click "Save" to finalize the Work Center record.

After a Work Center has been added, Maintenance Tasks can be performed, depreciation costs can be posted to the GL, and the Work Center Tree can be viewed to get a visual understanding of how the Work Center relates to its' parent/children records.

Adding a Container

  1. Navigate to Inventory > Maintenance > Containers.
  2. Click "New" to open the Edit Container form and complete the General tab.
    1. Enter an appropriate number and unit of measure for the Container. The other fields are optional. Reference the link in the first sentence for additional information.
  3. Navigate to the Fixed Assets tab and enter acquisition and depreciation details.
    1. If known, enter the Acquired date (the date the asset was purchased) and Acquisition Cost. Regarding the cost, the general rule is to include all costs necessary to get the asset ready to use, up to the point it is put into service, including installation, freight costs, and sales taxes.
    2. To post depreciation costs to the GL, select a Depreciation method, Account, and enter the appropriate number of Months. For more information, refer to the Depreciating Assets page.
  4. Navigate to the Maintenance tab and assign Maintenance Tasks for the Container. For more information, refer to Creating Maintenance Tasks.
  5. Once all pertinent information has been entered, click "Save" to finalize the Container record.