Job costing is calculating the actual cost of each individual job, mainly labor, parts, travel and any return visits, and comparing it with what you billed. The result is the profit or loss on that job.
Company-level reports tell you whether the business made money. Job costing tells you which work made it and which work lost it.
How to calculate job cost
With loaded labor cost per hour, C, on-site hours, S, drive hours, D, parts cost, P, and vehicle cost, V, over M miles:
Job cost = C × (S + D) + P + V × M
Then:
Job margin = Revenue − Job cost
Say a job billed $480. The technician spent 2 hours on site and 1 hour driving at a loaded cost of $60 an hour, used $90 of parts and drove 30 miles at $0.70 a mile. Job cost is $180 + $90 + $21, or $291. Margin is $189, about 39% of revenue.
If the job needed a second visit, add that visit's labor, drive and miles to the same job. Return visits are where many jobs that look profitable turn out not to be.
Why it matters
Job costing shows patterns that averages hide. Certain job types, customers or zones consistently lose money. A common finding is that the same job type earns very different margins depending on how far the truck drove to get there.
That is why drive time belongs in the job cost. If you leave it out, every job looks equally profitable regardless of distance, and the pricing never gets fixed. Allocate each drive leg to the job it led to. The windshield time post covers measuring those legs from job timestamps.
Use the results to adjust prices, add a trip charge for distant zones, or change which work you accept. The field service reporting guide covers building a job cost report.
A common mistake
Using billed hours instead of actual hours. If a flat-rate job is billed as 1.5 hours but took 3, the job cost must use 3. Otherwise the report shows the price book, not the work.
Related terms
- Gross margin per job is the output of job costing.
- Labor rate is what you charge; loaded labor cost is what you pay.
- Truck roll cost is part of each job's total.
- Truck stock usage must be recorded per job for costs to be complete.
Common questions
What is the difference between job costing and gross margin?
Job costing is the process of adding up costs. Gross margin is the result: revenue minus those costs, often shown as a percentage.
Should overhead be included in job costing?
Most companies leave fixed overhead out of the per-job number and compare gross margin per job against an overhead target. Allocating overhead to each job is possible but adds work and guesswork.
How do you cost drive time to a job?
Assign each drive leg to the job it led to. The drive from job A to job B is a cost of job B. The drive home at the end of the day can be spread across the day's jobs.