Job Costing
Definition
Job costing is the practice of tracking every labor, material, and overhead cost tied to a specific job so you can measure its true profitability.
What Job Costing Means for Your Business
What it means
Job costing breaks financial performance down to the single-job level. Instead of looking at the whole business at month end, you see which jobs made money and which bled.
Why it matters
Without job costing, you are guessing. Some of the jobs you think are profitable are actually losses. Some techs you think are fast are producing low-margin work. Job costing gives you the truth.
How contractors use it
The system captures labor hours from time tracking, material costs from purchase orders, and burdened overhead from fixed allocations. Managers review job cost reports weekly and adjust pricing and processes to match reality.
Real-World Example
An electrical contractor found that 22% of its residential remodel jobs were running below 20% gross margin. Re-pricing those job types recovered an estimated $310,000 in annual margin.
Related Terms
Gross Margin
Gross margin is revenue minus the direct cost of labor and materials, expressed as a percentage of revenue.
Labor Burden
Labor burden is the total cost of employing a technician beyond base wages, including payroll taxes, benefits, insurance, uniforms, and workers' compensation.
Overhead Allocation
Overhead allocation is the accounting method of spreading indirect costs like rent, insurance, and office salaries across jobs or departments so true profitability can be measured.
Cost of Goods Sold
Cost of goods sold, or COGS, is the direct cost of labor and materials required to deliver the services you billed, excluding overhead.
Burdened Labor Rate
Burdened labor rate is a technician's true hourly cost after adding payroll taxes, benefits, and other employment overhead on top of base wages.
Put This Into Practice with Free Software
Kaldr Tech handles job costing and everything else you need to run your shop. $0/month, 3.5% + 30¢ per transaction.