A method of costing that tracks the cost and revenues of individual projects and jobs within an entity. This method considers direct and indirect costs under three categories: labor, materials and overhead. Job costing allows an entity to uniformly report profitability by job (project or service). Fitting job costing in an accounting system assumes the ability to connect a job’s monetary numbers to each and every item of expenses and revenues.
Job costing (also known as job order costing or project-based accounting) suits those entities that produce goods or services upon receipt of a customer order. With job costing, an entity can adjust its prices to achieve its target gross profit margin.
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