Job Costing in FactsERP
Job costing involves the calculation of costs involved in a construction "job" or the manufacturing of goods done in discrete batches. These costs are recorded in ledger accounts throughout the life of the job or batch and are then summarized in the final trial balance before preparing the job cost or batch manufacturing statement.
Job costing results in discrete "buckets" of information about each job that the cost accountant can review to see if it really should be assigned to that job. If there are many jobs currently in progress, there is a strong chance that costs will be incorrectly assigned, but the very nature of the job costing system makes it highly auditable.
Purpose of Job costing
On a simple level, job costing which applies to builders in the modern world, can be defined as a management control process of tracking and categorizing every cost incurred in business. The costs are usually associated with a particular job or construction project and then further categorized by the costs’ relation to labor, burden, materials, subcontracts, equipment, etc. In most job costing systems, the costs are also associated with tasks on the job or types of work completed.
The goal is to get a detailed information about how and why costs are incurred. Knowing this information can help a contractor with the following:
| Tracking the progress of jobs as they are worked, as opposed to after they are finished. |
| Improving the estimating and scheduling process by discovering where estimated costs frequently vary from actual costs. |
| Controlling purchasing and use of materials and labor by uncovering trends in spending. |
| Determining which areas of the business are most or least profitable|
Thus we can say that job costing can benefit contractors of every trade and size. The ability to point the specific areas where money is made will lead to a successful business.