What is job costing?

Job costing is a costing method used to allocate costs to specific jobs, projects, or orders undertaken by an organization. It is commonly employed in industries where products or services are customized, and each unit of output is distinct and identifiable. Examples of industries where job costing is prevalent include construction, consulting, and custom manufacturing. In job costing, direct costs such as materials, labor, and other expenses directly attributable to a particular job are traced and allocated to that job. Indirect costs, also known as overheads, are allocated to jobs based on a predetermined allocation basis, such as labor hours, machine hours, or material costs. Job costing provides valuable insights into the cost of individual jobs, helps in pricing decisions, and enables accurate cost estimation for future similar projects.