Job costing is a financial management system used in construction to track and allocate costs to individual projects. It helps contractors determine profitability by categorizing expenses such as labor, materials, equipment, and overhead.
How Job Costing Improves Financial Accuracy
By assigning costs to specific jobs, contractors can compare actual expenses against estimates, identify inefficiencies, and adjust pricing strategies for future projects.
Key Steps in Job Costing
- Break down costs into direct and indirect categories
- Use job codes to track expenses across different project components
- Regularly update cost reports to monitor budget performance
Related Terms: Cost Breakdown Structure (CBS) (CBS), Work Breakdown Structure (WBS), Earned Value Management (EVM) (EVM), Construction Accounting Software
FAQs
How does job costing differ from general accounting?
A: Job costing focuses on individual projects, while general accounting tracks overall company financials.
Can job costing help prevent cost overruns?
A: Yes, by monitoring expenses in real time, contractors can detect and correct budget issues early.