Finding Out The Cost of Your Job
Job costing is an accounting practice whereby costs are accumulated by job. Generally, you will be tracking direct material and direct labor until the job is completed. Once you add overhead to the figures you generate after tracking the labor and material, you know how much your job cost is. This allows you to determine the profit margin of each job which will help you to estimate funding for future projects.
One step in projecting the profit of a particular job is on the labor side. You will determine the man-hour rate. When you have this figure, you will know what you need to make per hour on each job to meet your labor expenses. Determining this will also allow you to find the actual man-hour rate you are getting on jobs you have done. Through this exercise, you will probably find just because a project brings in a lot money, doesn’t necessarily mean it is more profitable.
To calculate the man-hour rate you will need to know how many workers you have, how many hours they work per week, and how many weeks are in your season. You will need to figure your yearly costs and desired profit margin. To determine your gross dollars per production hour, you will take the total costs plus the profit margin and divide it the your total yearly man hours. This will be your target man-hour rate per job.
To find out how close you are coming to meeting this amount, take the amount of man hours to date and divide it by the gross revenue from property to date. Paying attention to where the time is going is an essential step in trimming project costs. Once you begin tracking time, you can see if your rate per job is on track and this will allow you to monitor your laborers effect on your bottom line. In better times, you may have been able to absorb the inflated true cost of your employees. However, in today’s economy, the personal e-mails, smoke breaks, and not accounting for the training curve will ruin your budget.
With this information you can determine if hiring a better skilled employee at a higher rate will help your bottom line or hurt it. The longer you track your jobs, the better your information and, in turn, you can arrive at a more informed decision.