How to calculate a job cost sheet in accounting

Updated March 23, 2017

A job cost sheet breaks down a manufacturing project into three types of costs: direct materials, direct labour and manufacturing overhead. Direct materials are the costs of all the materials needed to manufacture the product. Direct labour is the amount of labour used to complete the project. Manufacturing overhead is the indirect costs associated with creating the product. The job cost sheet then summarises the costs by each classification.

Add all the costs of materials needed to complete the project. For example, a company manufactures widgets. To produce 100 widgets, the business requires £13 of metal, £2 in screws and £5 in wood. The total cost of direct materials is £20.

Calculate the amount of labour costs. In our example, the company pays £9 an hour to the two employees who create the widgets. The two employees work a total of 10 hours to produce 100 widgets. Therefore, the company's total direct labour costs are £97.

Calculate the amount of manufacturing overhead. Manufacturing overhead is normally determined as a percentage of hours worked. For example, the company estimates that overhead is 125 per cent of labour costs. Therefore, there is £121.80 in manufacturing overhead costs from the equation £97 x 1.25.

Add the costs calculated in Steps 1 through 3. In our example, £20 + £97 + £121.80 = £240.10. This is the total cost of the project.

Divide the total cost of the project by the number of units produced to determine cost per unit. In our example, £240.10 / 100 units = £2.40 per unit.

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About the Author

Carter McBride started writing in 2007 with CMBA's IP section. He has written for Bureau of National Affairs, Inc and various websites. He received a CALI Award for The Actual Impact of MasterCard's Initial Public Offering in 2008. McBride is an attorney with a Juris Doctor from Case Western Reserve University and a Master of Science in accounting from the University of Connecticut.