What is job costing in manufacturing?

Material: every item issued to the job, valued at what it actually cost, less anything returned to stock. Labour: hours logged at each work centre times that centre's rate, which can include the machine as well as the operator. Subcontract or job work: the vendor's bill for plating, heat treatment or machining done outside, attached to the job. Overhead: rent, power, supervision and other costs that cannot be traced to one job, applied by a rule such as a percentage of labour or a rate per machine hour. The first three are measured; the fourth is allocated. Keep them separate in reports so you can see which is real and which is an assumption.

Most small shops quote from a standard estimate and never check it against what the job actually consumed. The estimate drifts. Material prices move, a routing step takes twice as long as planned, scrap on one part is far higher than the BOM allows. Without actuals, the shop keeps quoting the same price and either loses the work it should win or wins the work it should refuse. Job costing closes the loop: when the job closes, compare material and labour actuals against the quote, by line. The pattern over twenty jobs tells you which products, customers and operations make money. That is worth more than any single month's profit figure.

If any of these is missing the job cost is a guess dressed as a number. The most common gap is labour: operators record a shift, not the jobs within it, and the cost is spread evenly over whatever was open. The fix is a job card scanned at the start and end of each operation.

• A stock ledger that values each issue at a real cost
• Material issues and returns posted against the job on the day
• A routing with work centres and an hourly rate per centre
• Labour logged per job and operation, not per shift total
• Vendor bills for job work linked to the job
• A clear close date, after which nothing more posts to the job

Process costing averages costs over a period and a quantity: a food plant that runs the same line all week divides total cost by kilograms produced. Job costing is for shops where each order is distinct: a fabricated frame, a machined batch of fifty, a custom panel. Some shops need both. A powder-coating line inside a fabrication shop can be costed as a process, with a rate per square metre charged to each job that passes through it. Choose by how the work flows, not by what the software prefers.