Job costing is a method that tracks expenses for individual jobs or projects instead of averaging costs across multiple jobs or products. This approach allows for a detailed analysis of financial data, showing how resources are allocated for each specific job. By focusing on the costs for each project, your organization can better understand profitability and assess the financial success of each job. Additionally, this method helps in setting accurate pricing strategies that reflect actual costs, ensuring your pricing is both competitive and profitable. Job costing also improves cost control by identifying areas where expenses can be reduced or managed more effectively, leading to better financial results for your organization.
Core Components of Job Costing
Direct materials: Raw materials used specifically for a job.
Direct labor: Wages paid to employees directly involved in the job.
Overhead: Indirect costs such as utilities, rent, and administrative expenses are allocated to the job.
Job costing is ideal for industries where projects vary significantly, such as construction, manufacturing, and professional services.
Using the Job Costing Feature
The Job Costing feature lets you assign jobs to employees in various roles, apply different rates, and link jobs to projects and clients, enhancing visibility and control over labor costs.
Setup Steps
Complete the initial Job Costing setup according to your company’s needs.
Enable the Job Costing Reporting Hours feature to grant employee access.
Add and configure jobs, including setting different job rates.
(Optional) Add clients.
Add projects and assign jobs and clients as needed.
Employees can clock in and out by selecting a project or job.
Managers should run Job Costing reports to review and analyze job-related data.