Track direct costs (materials, labor, subcontractors) per job and allocate overhead. Compare estimates to actual costs, calculate margins and break-even prices, and use data to improve future bidding.
Key Takeaways
Why This Matters on the Exam
Job costing is the financial foundation of a successful plumbing business and is tested on the C-36 Law & Business exam. Without proper cost tracking, you can't determine profitability, set competitive prices, or identify problem areas. Many contractors fail because they don't understand their true costs. Job costing allows you to bid accurately, manage projects profitably, and make data-driven business decisions.
What You Must Know
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Direct costs (materials, labor, subcontractors, equipment rental) assigned to specific jobs; indirect costs (overhead) allocated across all projects.
Labor cost calculation: (hourly rate × hours worked) + (payroll taxes/benefits percentage of wage); includes travel time and supervision.
Overhead allocation methods: percentage of revenue, per labor hour, per job, square footage, or percentage of direct labor cost.
Gross margin = (Revenue − Direct Costs) / Revenue × 100; typical 30–40%. Net margin after overhead allocation typically 10–20%.
Break-even price = Direct Costs + Overhead Allocation; pricing below this results in loss; minimum acceptable bid threshold.
Work-in-progress (WIP) reporting tracks estimated vs. actual costs, percent complete, and variance during project execution in real-time.
Change orders must be tracked separately from original contract to isolate additional work costs and profitability; higher margins often apply.
Comparing estimated vs. actual costs across jobs identifies estimation accuracy, labor efficiency, material waste, and guides future bidding adjustments.