10.2 Tracking Job Costs

10.2 Tracking Job Costs

Area D's job costs item is accounting and mathematics. Builder's Guide to Accounting (2001) is the job-cost textbook on the B&F list; Circular E 2025 in the Contractors Manual 2025 supplies the payroll-tax percentages that turn a wage into a burdened hour. Section 4.2 taught overhead — the cost of staying open. Section 9.1 taught percentage-of-completion. This section is the job-cost ledger that feeds both: every dollar that exists because this contract exists.

If you dump crane rental, refrigerant, and the mechanical permit into shop supplies, two things happen. The job looks more profitable than it is, and overhead looks worse than it is. You then underbid the next 40-ton set and wonder why the checking account died. The qualifying agent still owns those financials under F.S. 489.1195.

Direct job cost versus overhead

Direct job cost (cost of sales on a named job) is field labor on that job, materials incorporated into that job, the subcontract written for that address, job-specific equipment, job-specific rentals, permits and inspections for that address, sales or use tax paid as the consumer of those materials, and freight to the site.

Overhead (period cost of the shop) is rent, office salaries, advertising, shop utilities, general liability that is not job-billed, the unused service van, unused sheet-metal-brake depreciation, and CPE. Recover overhead through markup, not by hiding it inside Job 4412 so the changeout looks cheap.

A cost can be direct on Monday and overhead on Tuesday. The shop's nitrogen bottle used for every brazing job is overhead (or a small allocated shop-supply rate). A nitrogen tube rented for one hospital braze-out is a job cost. The test is not the account name on the vendor's invoice. The test is: would this dollar have been spent if this contract did not exist?

HVAC cost codes the exam expects you to recognize

Use a chart of cost codes so every invoice and time card hits the same buckets. Typical Florida HVAC codes:

Class A work over 25 tons cooling or 500,000 Btu heating in any one system (F.S. 489.105) is where crane and large-equipment codes dominate. A Class B candidate still needs the theory: the Class B outline drops 25–100 and over-100-ton install items, not the idea that a crane is a job cost. Setting a 4-ton condensing unit with two techs and a hand truck still has equipment, refrigerant, labor, and permit codes.

Burdened labor (the math)

Do not cost jobs at the technician's straight-time wage. Burdened labor is the wage plus the employer costs that move with that hour.

Burdened rate = hourly wage + employer FICA (6.2% Social Security + 1.45% Medicare = 7.65% until the Social Security wage base printed in Circular E 2025) + FUTA + Florida reemployment tax (while each is still inside the $7,000 wage base) + workers' compensation allocated to that class + employer-paid benefits that attach to hours (health insurance, paid-time-off accrual if the shop burdens it).

Worked example — W-2 installer, $28.00 per hour, wages still under the Social Security wage base. This hour is still inside the $7,000 FUTA and reemployment bases. The shop's workers' compensation allocation to this class is $3.20 per hour (use your policy; the exam will give the figure — do not invent an NCCI rate). New-employer reemployment tax 2.7%. Full FUTA credit, effective 0.6%.

• Employer FICA = 0.0765 × 28.00 = $2.14
• FUTA = 0.006 × 28.00 = $0.17
• SUTA = 0.027 × 28.00 = $0.76
• WC = $3.20
• Burdened rate = 28.00 + 2.14 + 0.17 + 0.76 + 3.20 = $34.27 per hour

After the employee has earned $7,000 in the calendar year, drop FUTA and Florida reemployment tax from the burden — they are $0 on later hours. After the Circular E Social Security wage base, drop the 6.2% but keep 1.45% Medicare (there is no Medicare wage cap). Additional Medicare tax of 0.9% on employee wages over $200,000 (single filer threshold) is employee-only; it is withheld, not an employer job-cost burden.

Overtime: the Fair Labor Standards Act (FLSA) requires time-and-a-half on the wage after 40 hours in the workweek, then apply the percentages to the overtime wage. If Saturday premium is $42.00 per hour, employer FICA is 7.65% of $42.00, not of $28.00.

Worked job — Class B 4-ton changeout, lump-sum $8,400.

Labor quantity variance = (22 − 18) × 34.27 = $137.08 unfavorable (duct modifications after the drywall was closed). Equipment price variance = 3,100 − 3,250 = $150 favorable. Net, the job ran $247 over the direct budget. Gross profit before overhead = 8,400 − 5,359 = $3,041. If the shop's overhead-recovery target was 18% of contract (0.18 × 8,400 = $1,512), remaining contribution is about $1,529. That is the number that pays rent. Costing labor at $28.00 would have understated labor by 22 × $6.27 = $138 and lied about margin.

Equipment, refrigerant, crane, permit — traps

Equipment on a named job is a job cost when it is purchased for that contract or issued from inventory to that job. A 40-ton RTU staged for Job 4412 is not inventory after it is committed; Builder's Guide wants it on the job. If you progress-bill stored equipment that is still at the vendor, you recreate the overbilling problem from section 9.1.

Refrigerant is not shop supplies. EPA Section 608 already tracks who added what; the job-cost code is how you know whether Job 4412 used 18 lb or 31 lb. Extra pounds are a change-order conversation, not a mystery in June.

Crane: setting a packaged unit with a rented crane is incurred because of that roof, not because you have a shop. Code it to the job. If you own a boom truck, some shops burden an internal rental rate to the job so equipment recovery is not lost in overhead — that internal rate is still a job cost.

Permit: the mechanical permit and inspection fees for that address are job costs. They are not sales tax (do not put them on DR-15 as collections) and they are not overhead. A Class A 80-ton schoolhouse job with after-hours inspections can have permit and fee costs in the thousands. Burying them in overhead makes every 3-ton changeout look expensive and every large set look cheap.

Percentage of completion eats job cost

Cost-to-cost percentage of completion (POC) = costs incurred to date ÷ current estimated total cost (not ÷ contract price). Earned revenue = POC × contract price.

Worked example — certified Class A, $180,000 lump-sum, one 35-ton unit (over Class B's 25-ton cap). Costs to date $72,000. The estimator now forecasts $160,000 total because the crane came in high.

POC = 72,000 / 160,000 = 45%

Earned revenue = 0.45 × 180,000 = $81,000

If billed $90,000 → $9,000 overbilling (a current liability)

Wrong denominator (72,000 / 180,000 = 40%) is the exam trap. Job-cost discipline is what makes the 45% true: if the crane is still sitting in overhead, costs to date are understated, POC is understated, and you underbill in the books while thinking you are conservative.

Committed costs (open purchase orders) are not yet costs incurred for POC until the work or materials are received, but they update the estimated total the moment you know the crane will be $1,850 instead of $900. That is why the job-cost ledger and the estimate have to talk to each other weekly, not at punch list.

Florida HVAC scenario

Suncoast Air, qualified by a certified Class A agent, sets a 40-ton RTU on a Sarasota medical office. Codes: equipment $28,400, crane $1,850, permit $410, duct $6,200, refrigerant $640, copper $1,100, burdened labor 86 hours × $34.27 = $2,947, electrical-within-scope $780. Direct total $42,327 on a $72,000 contract. A project manager who calls the crane overhead would show a fake $1,850 of extra gross and then fail to recover it on the next bid. Class B candidates will not install this 40-ton system, but they will be asked whether a crane and a permit are job costs.