Job Costing: What It Is and How Fabrication Shops Track It
Job costing is an accounting method that tracks all costs — labor, materials, and overhead — associated with a specific job or production order. For fabrication shops, this means knowing what each customer project actually cost to produce, not just the total costs for a period. Job costing produces a per-job profit or loss figure that tells you whether your pricing and operations are working.
FabWise directly supports the labor component of job costing for fabrication shops. It does not handle materials or overhead allocation.
Why Job Costing Matters for Fab Shops
Most fabrication shops quote jobs before they know the actual cost. The quote is based on estimated labor hours, material quantities, and overhead assumptions. Job costing is how you find out whether those estimates were right.
Without job-level cost tracking, a shop knows its total costs and total revenue for a period. It cannot tell which jobs were profitable and which were not. Over time, this means the shop may be systematically overpricing some jobs (leaving money on the table) and underpricing others (subsidizing customers without knowing it).
With job costing, a shop can see the actual margin on each job and use that data to:
- Identify which job types are consistently profitable
- Identify which operations are consistently over-running estimates
- Improve quote accuracy over time by adjusting estimates based on actuals
The Three Components of Job Cost
A complete job cost includes:
Labor cost — hours worked on the job multiplied by the burdened labor rate. This is the most variable component and the one most likely to diverge from estimates. Accurate labor cost requires accurate hour attribution per job, which is the purpose of labor tracking.
Material cost — raw materials, consumables, and purchased components used for the job. Material costs are typically tracked through purchase orders and inventory systems. FabWise does not track materials.
Overhead allocation — the share of fixed and semi-fixed shop costs (rent, equipment depreciation, insurance, non-direct labor) allocated to this job. Common allocation methods: a percentage of direct labor cost, a rate per machine hour, or a fixed fee per unit.
What Accurate Labor Tracking Changes
The labor component is where most fab shop job costing falls apart. If hours per job are estimated or reconstructed rather than captured at the point of work, the labor cost figures are estimates, not actuals.
FabWise captures labor hours per worker, per job, per task at clock-in. The result is actual hours per job, not estimated hours. You apply your burdened rates; the labor cost line of your job cost is calculated from data, not from memory.
The payroll export from the same system gives you hours per worker per period for payroll, so you don't maintain two sets of time records.
Job Costing vs. Process Costing
Job costing and process costing are two different cost accounting methods. Job costing tracks costs by individual job or order — used when each job is distinct (custom work, project-based manufacturing). Process costing tracks costs by production run or process — used when output is uniform and continuous (commodity manufacturing).
Fabrication, metalworking, and custom machining shops almost always use job costing. Each customer order is different in specifications, materials, and labor requirements.
Frequently Asked Questions
What is the difference between job costing and job estimating?
Estimating happens before the job: you predict what it will cost based on specifications. Job costing happens after (or during) the job: you track what it actually cost. The comparison between estimate and actual is where you learn to estimate better.
Do I need dedicated software for job costing?
Not necessarily. Many shops run job costing in a spreadsheet. The requirement is accurate data — actual hours per job, actual material costs, and a clear overhead allocation method. The complexity of the tool matters less than the accuracy of the inputs.
How does FabWise help with job costing?
FabWise captures actual labor hours per job in real time at clock-in. It exports those hours by job and task for any period, which is the input to your labor cost calculation. The job costing feature provides the per-job hours summary; you apply your rates.