Manufacturing organizations are responsible for creating items that consistently live up to quality standards and are uniform according to their product lines. For example, if you make tables, you'd expect each table to have legs that are the correct length, to be stained the right colors and to be stable when put together. However, tables also need to be built for various use cases within homes and offices, and the costs associated with making these items versus the revenue they bring in will vary. Job costing is a critical process for manufacturers for a few key reasons:

1. Attach costs to jobs

Manufacturers make a number of different products and often customize items according to customer specifications. It's important to not only understand how much material will be required to put the item together, but how much it will cost and how many man-hours can be expected to complete it. According to "Accounting for Managers", organizations can record the raw materials purchased and how much was placed into production. The flow of direct materials is critical to ensuring there's enough inventory on hand for other jobs and for pricing out the total cost of the items used.

Along with material costs, managers must also monitor labor wages. Many systems log in hours through timesheets. Putting these expenses together with the material totals will provide an overall picture of that particular job's cost. These logs will go a long way for reporting and project planning purposes.

2. Track each client's projects

Businesses get a variety of customers, and it's important to ensure that each order is filled and goes to the right place. Manufacturing companies may have different approaches to pricing their jobs. According to Houston Chronicle Jonathan Lister, each client is considered a separate job, and sometimes, projects over a certain value may be counted as a single job itself. Organizations must not only understand what their clients are looking for, but also provide an estimate for how much the project will cost to complete. Job costing efforts will ensure that manufacturers are considering each initiative and are providing a price that reflects the materials and work necessary for that particular product.

3. Accurately predict expenses for future efforts

Manufacturing businesses can better predict future costs and identify areas that may cause overruns. By collecting job cost data, you'll be able to tighten your current expenditures through reining in mounting expenses on various projects. Accurate job costing information will help reduce losses and ensure that you're better in line with your goals. Tighter and more accurate budgets reduce the area for risk and can prevent overspending.

Manufacturers have a number of things to think about when it comes to job costing. They may produce one product, but that item can be customized in a vast number of ways, making it necessary to understand the labor and material costs attached to each project. With job costing within an ERP system, manufacturers can better manage their inventory and understand the expenses associated with each client's project.