What is job costing?
Job costing (or job order costing) assigns costs to specific, unique jobs rather than averaging them across mass production. It suits businesses where every order is different, such as construction, agencies, printing, repairs, consulting and custom manufacturing.
The three cost elements
- Direct materials: items used on the job.
- Direct labour: hours worked on the job × hourly cost.
- Overheads: indirect costs (rent, utilities, equipment) allocated using a rate, such as per labour hour.
Job cost = Direct materials + Direct labour + Applied overhead
Example
A carpenter builds custom shelving:
- Materials: $600
- Labour: 20 hours × $25 = $500
- Overhead: 20 hours × $10 = $200
- Total job cost: $1,300
If the customer pays $1,900, job profit is $600 (a 32% margin).
Job costing vs process costing
Process costing spreads costs evenly across identical units, as in a bottling plant. Job costing tracks each job separately.
Why it matters
- Shows which jobs, clients or job types are most profitable.
- Improves quoting and pricing.
- Highlights overruns while the job is still in progress.