Home - Job Costing System
Anyone who is involved in providing services or manufacturing goods needs to be able to keep track of all costs incurred with each job. Job Costing is basically a way of systematically determining labour, material and any other costs associated with a job so that you can prepare a quotation for a customer. In order to do this accurately, many companies and individuals use job costing systems that are able to give individual or batch costs for the jobs to be done. This makes it easy to estimate profits from each job.
Any system meant for this task needs to be able to address a number is issues. The main three variables that must be considered are discussed below.
For each job that is to be performed, the required labour must be estimated accurately. However, it is important to avoid using a flat rate for all jobs since they vary in complexity and time needed for completion. When handling labour costs, each job needs to be explicitly defined to make it easy for any user to match it with its corresponding costs. Timesheets and timecards can be vital in computing the required hours for the job.
Any job costing system needs to offer the user a way to track all the costs associated with materials that are meant for a particular job. This makes it possible to know how the quantity of material used for a job hence making it very easy to make approximations for future jobs. Moreover, in case excess material were ordered, then those that were returned to the store should also be indicated in the system and their costs subtracted from the overall material cost. A clear approximation of the materials required can be made by asking the client to give their exact requirements before taking up the job.
The amount of money charged as overhead varies significantly from one job to another. Estimating these costs is one of the most difficult tasks of this process since they are not tied to a particular job. Many companies sum up all non-job related expenses then divide them by the total working days in a year. The result of this division is then multiplied by the actual number of working days that were actively spent on projects to give overhead costs (actual number of working days spent on projects is always less than the number of working days in a year).
The main of job costing for your company is to figure out your profits margins easily. These profits are likely to vary depending on how busy the year may have been as well as competition received from other companies.
Once a job is completed, it must be flagged as completed in the job costing system. Failure to do this may lead to continued accumulation of working hours that is usually one the main sources or errors in these systems. Other than job costing, many organizations also use process costing in order to track costs by processes rather than jobs.