Glossary · Job costing
Job costing
Job costing is the practice of recording what each job actually costs, in labor, materials, equipment and subcontractors, and comparing it with the estimate. The comparison shows where a job is making or losing money while there is still time to act on it.
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How does job costing work?
Job costing works by giving every job a budget broken into lines, then posting real costs to those lines as they happen. Labor is usually the largest and the least certain line, because it depends on hours that someone has to record.
- 1
Budget by line
The estimate is split into cost codes, each with hours and dollars.
- 2
Post actuals
Approved hours times a loaded labor rate, plus material, equipment and subcontractor invoices, are posted to the same lines.
- 3
Compare and act
The office checks actual against budget weekly, not at job close, and changes staffing or pricing on the next phase.
What does job costing show on a real job?
Labor on a 6-week tenant improvement
- Estimated labor
- 480 hours at a $52 loaded rate = $24,960
- Actual after 4 weeks
- 410 hours at $52 = $21,320
- Share of the 6-week estimate used
- 410 ÷ 480 = 85% of hours, with 33% of the schedule left
- Projected overrun if the pace holds
- (410 ÷ 4) × 6 = 615 hours, which is 135 over estimate
Illustrative numbers. Whether the pace holds depends on the work remaining, so treat a projection as a prompt to look, not a verdict.
The result is only as good as the hours behind it. Where the hours come from a handwritten sheet filled in on Friday, the job cost report inherits the guessing.
