Job Costing Basics

Job costing starts with creating an accurate estimate regarding the labor, material, equipment costs and other job related costs. The more accurate the estimate, the higher percentage that the bid will be awarded and the job will be profitable. The way the job is executed and the conditions of the job can also all have a positive or an adverse affect on the outcome of the job.

By tracking job cost actual against the estimate of costs, principals can see what areas of the jobs came in ahead and what parts of the job had cost overruns. Only by analyzing these issues can we decide what were the details and the factors that contributed to the outcome of the job. Ideally a company wants to duplicate the victories and avoid the setbacks. Finding the real root cause of variances in a job by looking deeper into the process will help us. Top soil and sod installation could have looked bad on paper, the clay soil, the slope and the hard rains could that part of the job back, not the estimate nor the smart and hard work of everyone in the field.

Drilling down into Job Costing will help a company ask why. Analyzing and interpreting the discoveries and turning them into actionable steps, will be a tool that will help a company prosper.

Hint: Drill deeper into equipment, medical, fuel, small tools and paid time off.