Law & Business · Module 2

Job Costing

Lesson 3 of 8~20 minFree previewCurrent as of September 2026Leer en español

Job costing tells you whether each job made money. You will learn to separate direct job costs from overhead, build a labor cost that includes the employer's payroll costs, charge overhead to jobs with your own rate, track work in progress, keep change orders separate, and find the break-even price. Every percentage in this lesson is an example number for practice math, because the right numbers come from your own books.

Key Takeaways

Direct costs (materials, direct labor with its payroll costs, subcontracts, equipment rented for the job, job permits) are charged to the job; overhead is spread over all jobs.
Figure your overhead rate from your own books, for example last year's overhead divided by last year's direct labor cost.
Break-even price for a job is its direct cost plus its share of overhead; below that, the job loses money.
A work in progress report compares estimated cost, cost to date and estimated cost to complete while the job is still running.
On a home improvement job a change order is not enforceable unless it states the scope, the price change and the effect on payments or completion date (B&P 7159.6); track each one as its own cost center.
CSLB can discipline a licensee who does not keep contract, receipt and disbursement records for at least 5 years after a project is completed (B&P 7111).
Compare estimate against actual on every job; the differences are what fix your next bid.

Why This Matters

CSLB's Law and Business study guide includes "Contract Requirements and Execution," which covers bidding and cost control, and "Business Finances," which covers budget and planning. Job costing connects them. Company-wide books tell you whether the business made money this year. Job costing tells you which jobs made it and which ones gave it away, so you know what to bid next time.

Direct Costs and Overhead

A direct cost can be traced to one job. Overhead (indirect cost, or general and administrative cost) keeps the company running but cannot be traced to one job.

Direct job costs usually include:

Materials: pipe, fittings, fixtures, valves, water heaters, hangers, solder, sealants, plus delivery charges and the sales or use tax you pay on them.
Direct labor: wages for the hours your crew spends on that job, including drive time to the job if you pay for it, plus the employer's payroll costs on those wages (see below).
Subcontracts: the invoice amount for work a subcontractor performs on that job, such as trenching or concrete cutting.
Equipment rented for the job: a jetter, a trencher or a sewer camera rented for that project.
Job-specific costs: permits and inspection fees for that job, dumpsters, and job-specific bonds.

Overhead usually includes:

Office and shop rent, office utilities, office staff wages.
Owner's and estimator's vehicles used across all jobs, and their depreciation.
Accounting, legal fees, advertising, software.
License renewal and the contractor's bond.
Small tools and shop supplies that are not tracked to jobs.

CSLB uses a sample question on this very idea: depreciation on a car bought for general use by the sales staff goes to general and administrative costs, not to any one job.

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