This article is for users that have the Accounts link function enabled with a general ledger account package such as Xero.

When setting up your accounts in vintrace, you can choose between the direct cost method and indirect cost method. If you’re unsure, we recommend leaving the cost method as direct.

You can change an account’s cost method from the Winery Setup window (Setup Options > Accounts > Account).

Generally, in wine production - as in all manufacturing industries - your costs can be classified as direct or indirect.

Direct costs are those inputs directly attributable to a particular lot of wine. This might include:

• Fruit
• Bulk wine
• Direct employee labor
• Bottling materials and dry-goods
• Chemicals and additions
• Freight as it relates to sourcing
• Third-party lab work

Indirect costs can’t be attributed to a particular wine. This generally includes overhead such as:

• Utilities
• Employee benefits
• Purchasing costs
• Handling and storage
• Depreciation
• Rent
• Taxes and insurance
• Chemicals and additions
• Freight

Some items, such as chemicals and additions, appear in both the direct and indirect costs.

Direct Cost

If you want the underlying expense or asset to directly journal to your Work in Progress accounts, the account’s Cost Method should be set to Direct.

For example, you’d use the direct costing method for purchases of chemicals where the Chemical account is an asset and you want the cost of each chemical addition to directly transfer to each lot of wine at the time the addition is made. At the time the addition is made, the journal shows a movement from your Chemical asset account to your Bulk Wine Work in Progress account. This is the default and most common option.

Indirect Cost

If you want to divide costs across your products, the account’s Cost Method should be set to Indirect.

For example, you’d use the indirect costing method if you don’t want to track chemical purchases in an asset account, but instead want to expense them. The assumption is that you’ll either expense these costs, and if you choose, apportion them across your products in bulk using the Cost Allocation Console.