Job costing explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
A printing press, a fabrication shop or a repair garage does something different for each customer. The only way to know whether an order made money is to follow its cost from the first sheet of paper to delivery. Job costing does that, using a job cost sheet, and gives the owner both a way to quote and a way to check the quote afterwards.
A job cost sheet collects, for one order, the direct material, direct labour and direct expenses actually used, adds overhead at the predetermined rate, and arrives at the total job cost. Price = job cost + administration and selling load + profit. After delivery, compare estimate with actual. Use it to quote with confidence, spot jobs that lose money and learn which estimate lines are consistently wrong.
When job costing fits and the data needed
Job costing suits work done to a customer's specification, where each order differs: printing, tool-making, contract fabrication, repairs, interiors. You need a job number on every material requisition and every labour ticket, department overhead rates (see the machine hour rate guide), a record of outside services bought for the job, and a way to track spoiled work. Firms that want job-wise profitability as a routine report can set it up with a costing and pricing analysis. For lots of identical items made for stock, see batch costing instead.
The method
- Estimate at quotation: material, labour hours, direct expenses, overhead, loading, profit.
- Open the job card with a job number on acceptance.
- Collect direct costs: material issued (less returns), labour tickets × rates, outside processing.
- Absorb overhead: department rate × hours (labour or machine) used by the job.
- Total and compare with the estimate on completion; record the reasons for differences.
- Spoiled and defective work. Normal spoilage inherent in the process is included in the job's cost (the estimate allows for it). Spoilage caused by a specific fault, such as a press error or a supplier's bad lot, is abnormal and is charged to the costing profit and loss account or recovered from the party at fault; rework for a defect normal to the job is charged to the job, while rework from an avoidable error is not.
Worked example: a printing press
The press prints 2,000 brochures for a customer (Job 101). All figures assumed.
Actual job cost
| Cost head | Basis | ₹ |
|---|---|---|
| Art paper | Issued, including a reprint after a colour mismatch | 100,000 |
| Ink and plates | Issued | 12,000 |
| Direct labour | Composing 15 h × 200 = 3,000; press 20 h × 250 = 5,000; binding 10 h × 150 = 1,500 | 9,500 |
| Direct expense | Outside lamination | 6,000 |
| Overhead | Composing 15 h × 100 = 1,500; press 20 machine h × 400 = 8,000; binding 10 h × 100 = 1,000 | 10,500 |
| Works cost | 138,000 | |
| Administration and selling load | 10 per cent of works cost | 13,800 |
| Total job cost | 151,800 |
Check: 100,000 + 12,000 + 9,500 + 6,000 + 10,500 = 138,000. 10 per cent of 138,000 = 13,800. 138,000 + 13,800 = 151,800.
The quotation was built from the estimate below. Profit was loaded at 20 per cent on cost (assumed).
| Head | Estimate (₹) | Actual (₹) | Variance (₹) |
|---|---|---|---|
| Paper | 92,000 | 100,000 | 8,000 over |
| Ink and plates | 12,000 | 12,000 | nil |
| Direct labour | 10,000 | 9,500 | 500 under |
| Direct expense | 6,000 | 6,000 | nil |
| Overhead | 11,000 | 10,500 | 500 under |
| Works cost | 131,000 | 138,000 | 7,000 over |
| Admin and selling load (10 per cent) | 13,100 | 13,800 | 700 over |
| Total cost | 144,100 | 151,800 | 7,700 over |
Check: 92,000 + 12,000 + 10,000 + 6,000 + 11,000 = 131,000; 10 per cent = 13,100; total 144,100. Variance: 8,000 − 500 − 500 = 7,000 on works cost; 13,800 − 13,100 = 700; total 7,700.
Price quoted = 144,100 × 1.20 = ₹172,920 (profit planned 28,820). Actual profit = 172,920 − 151,800 = ₹21,120, which is ₹7,700 less than planned (28,820 − 21,120 = 7,700).
What the owner decides. The whole of the overrun is traceable: ₹8,000 of paper went into a reprint after a colour mismatch. That is avoidable spoilage, not a feature of the job. The owner should decide whether to record the reprint as abnormal and write it off to the costing profit and loss account, so job profit is not distorted, and whether the cause (a press setting or a proof approval step) needs a fix. The job's other lines were within ₹500 of the estimate, so the estimating method is sound. Had the quote been given at a fixed price with no room, the press would still have made ₹21,120, but the margin fell from about 16.7 per cent of price to about 12.2 per cent (21,120 ÷ 172,920).
How to read the result
Look at the total, but also at which line varied: material variances point to wastage, spoilage or price, labour variances to hours estimated or ticketed, overhead variances to the rate or the machine time. If the same line is wrong on many jobs, fix the estimating method, not the job. Where many jobs are costed, a standard costing view of material and labour variances helps.
Common mistakes
- Not writing job numbers on requisitions and tickets, so costs fall into overhead.
- Using one overhead rate for all departments.
- Charging all spoilage to the job, which makes good jobs look poor.
- Forgetting the administration and selling load when quoting.
- Never comparing estimate with actual.
- Charging a rework to the next customer's job.
Compare the layout with the period cost sheet: the heads are the same, but a job cost sheet is built per order rather than per month.
Need help with costing your orders?
If your quotes depend on memory, we can help set up job cards, department rates and an estimate-against-actual report as part of a costing and pricing analysis.
Key takeaways
- A job cost sheet follows one customer's order with direct costs and absorbed overhead.
- Quote from an estimate in the same layout as the actual so that the two compare line by line.
- Normal spoilage is part of the job; abnormal spoilage is written off.
- Always compare estimate and actual, and investigate the line that moved.
- Job costing is for specific orders; batch costing is for lots of identical items.
Read next
- Overhead absorption rates and the machine hour rate
- Batch costing and economic batch quantity
- Cost sheet: prime cost to cost of sales
Disclaimer: The methods described are standard cost accounting and financial management techniques. The worked example uses an invented business and invented figures, including any tax, interest or exchange rate, which are assumptions for illustration and not current rates. Where the article refers to a legal requirement, the linked guide and the official text should be checked. This article is general information, not legal advice; check the official text before acting.