Standard and actual job cost: 3 standards to compare

• set an expected figure for each input before the job starts, beginning with material, labor and overhead.
• compare each expected figure with its actual figure after the job, one input at a time.
• keep material price, labor hours and overhead as three separate standards, not one lump total.
• treat textbook figures as illustrations of the method, not as rates for your trade.
• review drive time and other field variation, because small changes on each job can add up across a week.

Before the work starts, you set an expected cost for each input, such as material, labor and overhead. After the job, you compare each expected figure with the actual figure you paid or recorded, so the gap shows where the job drifted.

A textbook example shows how one input can move. According to OpenStax , a company may expect to pay $0.50 for each ounce of a raw ingredient, but after purchase it discovered it paid $0.60 for each ounce. That kind of gap is what this guide teaches you to find, and the example is an illustration, not a repair shop rate.

Expected cost and actual cost differ because they come from different moments. The expected figure is written before the work happens, and the actual figure is recorded only when the job closes. Keep both figures in the same job record so you can compare the original expectation with the result.

Write a standard for each input rather than one total for the whole job. A single total hides which input moved, so you cannot tell whether the cause was a purchase price, a labor estimate or an overhead allocation. Separate standards let you see which line changed. The sections below take three inputs in turn: material price, labor hours and overhead.

Set each standard from information you can point to, such as a supplier price list, a timed job log or an overhead figure your own books already hold. Keep a short note of where each expected figure came from. When the actual figure comes in, that note tells you whether the estimate was weak or the job went differently than planned.

Do not treat textbook examples as your rates. The accounting examples describe an illustrative ingredient purchase, a usual material price of $5.25 for each pound, two labor types and an overhead method, so copy the method and enter your own numbers. A figure taken from a different trade or a different place would mislead a repair estimate, so leave it out of your standards.

Keep the comparison routine short enough to repeat on every job. A standard that takes hours to build will be skipped on the next job. Start with the three inputs in this guide, and add more only when a specific job shows a gap you cannot explain.

Set the expected price for each unit before you buy, then record the price from the invoice that comes back.

The same source gives a second material figure, and it is a different kind of statement. OpenStax also gives a usual material purchase price of $5.25 for each pound. Treat that as a typical purchase price in the example, not a price you can count on for every order.

Use the expected price as the anchor for every purchase on the job. Write the unit, such as ounce or pound, next to the expected figure so the unit does not shift during the comparison. If an invoice uses a different unit, convert it before you compare, and write the conversion beside the standard. A standard in one unit and an invoice in another cannot be compared fairly.

Compare the actual price to the standard on each material line, not only on the job total. A total can hide a large gap on one item when other items came in under their expected figures. Keep line-level comparisons with the job record. For related reading, see the price book input settings guide .

Update a material standard only after you understand why the price changed. If the supplier raised the price for good, a new standard may be right for future quotes. If one purchase was an unusual order, keep the old standard and log the exception on that job. This keeps one odd purchase from quietly resetting your expected figures.

Labor hours is the second standard, and the source treats labor as two separate types rather than one pool. In the OpenStax example , the first type of labor is assembly, which takes 2.75 hours. Name each labor type on the job so the expected hours and the logged hours line up under the same heading.

The second type in that example is finishing , which takes 4 hours. Place that figure beside the assembly figure, so an overrun in one type stays visible instead of disappearing into a single average.

Log actual hours against the same labor types you used for the expected figure. A timesheet that records only total hours cannot show whether assembly or finishing ran long. If your crew records time in a different breakdown, map those hours to the standard's labor types before you compare anything, not after.

Show the labor types separately in your comparison report as well. An overrun in finishing hours points to a different question than an overrun in assembly hours. Read each labor line on its own, and write one short note beside any line that moved, naming the reason you recorded at the time.

Treat expected hours as a plan, not a promise to the crew. The standard tells you what the job was expected to take. When actual hours differ, find out whether the estimate, the crew or the scope changed, and record that answer with the job. That answer is what makes the next estimate better.

Set overhead after identifying the types that apply to the job. In the OpenStax example , the business must consider two types of overhead before determining its standard. Identify your own overhead types before you enter any overhead figure on a job.

Set overhead on its own line rather than folding it into labor or material. The source treats overhead as an input with its own standard. Keeping it separate means a change in overhead does not look like a change in crew hours or purchase prices. Use an overhead figure from your own records.

Name each overhead type in your job record so it has a clear place to sit. Write one short phrase explaining why each type belongs to the job, using words your bookkeeper will recognize. Do not carry an overhead figure from another job without checking that the same types apply to the new one.

Compare overhead against its standard last, after material and labor are settled. With those gaps identified, focus on the overhead allocation itself. Review the allocation separately so you can distinguish its effect from changes in purchase prices or crew hours.

Review the overhead standards on a regular schedule rather than after every job. If an overhead standard is wrong, each job built on it shows the same gap. When several jobs show that gap, the standard itself is the thing to review, not the individual jobs.

After the job closes, lay the three standards side by side with the three actual figures. Start with material, then labor hours, then overhead, checking the reason for each difference. Write the expected figure, the actual figure and the difference in the same row of your record.

Ask what changed for each gap you find. Sort the answer into one of three kinds: the price moved, the hours moved, or the overhead allocation moved. A gap that fits none of those three needs its own note, so it does not hide inside another line.

Record the reason as well as the number. A gap with no reason on file cannot inform the next estimate. Keep the reason in plain words, such as a supplier price change or a longer finishing stage, so it reads clearly when you come back to the job later.

Decide what to change before you change any standard. Update a standard only when the cause is one you expect to repeat. For a one-time event, leave the standard alone and note the exception on the job. This keeps each standard tied to what the job should cost, not to the most recent result.

Illustrative example: compare a material cost

Suppose the expected material cost is $10 and the actual cost is $15. Subtract $10 from $15: the actual cost is $5 higher. Record that difference beside the material line, then check the invoice for the reason. These amounts illustrate the calculation; they are not suggested rates.

Some variation never shows up on a single job's line. According to Contractormag , attendees will learn how unmanaged variation across preventive maintenance, repair approvals, fuel usage, vehicle specifications and replacement timing can quietly erode profitability. Compare several jobs to look for changes that are easy to miss on any one job.

Check each area against your job records rather than assuming it stayed stable. Look for the same change appearing across several jobs. Give each one a column or note in your review, so none of them is only mentioned in passing.

Treat repair approvals as a standard to check. If a job changes after approval, record the approved scope next to the expected figures, so the difference has a documented source. For related reading, see the field service settings checklist .

Drive time deserves its own line in the review. According to Fieldedge , even reducing drive time by 10 or 15 minutes on each job can make a meaningful difference across a full week of service calls. Track drive time for each job, so a small change is visible when you compare the week as a whole.

Fuel usage and vehicle specifications belong in the same review as drive time. Review those vehicle details alongside the other costs of each job. Write fuel and vehicle notes next to the labor hours they relate to, so the comparison reads as one job rather than several separate reports.

Next step: pick one recent job, write the expected material cost, labor hours and overhead cost, and compare each to the actual. Use the three standards in this guide as the columns, and fill each cell from the job record rather than from memory.

What is a standard cost?

In this guide, a standard is the expected cost you set for one input on a job before the work starts. The standard is the expected figure, and the actual figure is what you compare it with after the job. Set one for material, labor hours and overhead.

How do I spot a cost that drifted?

Compare each expected figure with the actual figure after the job, one input at a time. A drift is any gap between those two figures for the same input. Write the reason beside each gap so the next estimate can use it.

Why separate assembly and finishing labor?

Separate lines show which labor type ran long, so an overrun in one type does not disappear into an average.

Why does overhead need its own standard?

Overhead needs its own expected figure so you can distinguish it from material and labor costs. Set the standard for each type on its own line, using your own records rather than figures from another job.

Can drive time change job cost?

Reducing drive time can make a difference across a full week of service calls. Measure the effect in your own job records.

Where does unmanaged variation hide?

Check preventive maintenance, repair approvals, fuel usage, vehicle specifications and replacement timing. Those named areas are the places to check when a job's cost moves without an obvious cause. Review each area against the job record rather than assuming it stayed stable.