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Job costing, also known as project-based accounting or job order costing, is an accounting process that tracks the costs associated with individual tasks or jobs. It's used by businesses of all sizes, including construction, manufacturing, accounting companies, and law firms.
Job costing involves: Assigning job numbers to individual items of expenses and revenues Determining the cost of labor and materials for each job Using this information to create a quote for the customer
Job costing can help you answer questions like: How much does it cost to complete a project? How much does it cost to produce a product? How much does it cost to satisfy a client?
Job costing is usually broken into three specific categories: labor, materials, and overhead. For example, manufacturers use job costing to determine prices based on how much raw materials and labor were invested into a project. Service-based businesses like consulting offices use it to determine how much they need to charge a client based on the number of hours they need to dedicate to a certain project.
You can implement a thorough job costing method by: Treating internal jobs the same as billable or revenue-generating jobs Allocating expenses to both internal and external jobs Identifying which of your costs to categorize as direct and which to categorize as indirect
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