ACC 612 Job Costing.pdf

ACC Job Costing Tomoko Wainscott 1

Job Costing

Tomoko Wainscott

Liberty University

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Abstract

Introducing Job costing method in the actual situation. Use photography business as

an example, explain how important to learn the job costing to run the business successfully.

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Introduction,

The definition of Job Costing, is the process of calculating the cost of a single job or batch of

work. Also, it called specific order costing (Collin 2007). Job costing is a tool for tracking the

expense during the process of the job and calculating the revenue. It is an important tool for

“those who are pairing a relatively high dollar volume per customer with a relatively low number

of customers”(Snyder 2008) such as contractors, architects, photographer, and consultants

sale price is one of the basic ways to achieve the business goals ( Jackson 2014 p.36). At PPA

use cost-based pricing because knowing cost shows minimum necessary income for business.

PPA business guides are suggesting financial benchmarks for the home studio is 25% cost of

sales, 30% general expenses, and 45 % Net profit and owner’s compensation. If a photographer

sets the sales target at $150,000 , cost of sales is $37,500, general expenses is $45,000, and Net

profit + owner’s compensation is $67,500. (PPA Benchmark business guide 2015)

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The photography industry is under attack by amateur photographers or so-called moms

with a camera. Since amateur photographers do not care about making a profit for a living, an

amateur photographer’s price setting is extremely low. Mom Photographers take friend’s and

neighbor’s photograph for $100 to $300 because amateur photographers take photos for their

own joy and pocket money, not for business. This price setting does not cover basic expenses

like buying necessary equipment such as cameras and lights. In 2012, one of the Craigslist posts

portrait industry (Kounine 2015). After this post had shocked many photographers, many

professional photographers and organizations explained how professional photography

businesses set their prices. These explanations are a good example to look at job costing method

manufacturing overhead.

Direct materials are the materials which are used to create the finished product and

whose costs will be able to trace to the finished products (Garrison, Noreen, and Brewer 2015

p29). For the photography business, material costs are lab costs, shipping costs, mounting,

digital media, pens, order sheets, and packing materials. According to the PPA Business Guide

determining the cost of an 8’x10, print material costs will be a total of $ 8.50, and includes lab

cost, lab shipping, 8x10 mounting, and digital media charges.

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The next portion of job costing includes direct labor. Direct labor is “labor charges that

are easily traced to a particular job”(Garrison, Noreen,& Brewer 2015 p88). For the photography

business. Direct labor is normally the photographer and assistant photographer. If the studio

owns the lab, then the lab personnel are also direct labor. A photographer’s labor is categorized in

three portions. First, there is the consultation appointment, then shooting the session, and finally

the sale, all of which use man hours. The consultation can normally last 30 to 60 minutes. The

clothing, makeup, location, or ceremony scheduled to make sure the client and photographer

understand what they are going to shoot. Shooting the session is the time the photographer and

assistant work with the client to take the photographs. The average time of the session is one

p15). PetaPixel website shows the photographer’s standard hourly or per print fee. It says the

hobbyist fee is under $100; amateur is $25-$75, professional is $75-$250, and a top professional

is $200-$500 per hour (Sillars 2016). So if the customer uses a professional photographer for a

regular family session, it will cost between $331.25 to $1102.4 plus additional print material

costs.

Consultation 60 minutes + session 60 minutes + viewing 60 minutes + image artwork 85

minutes = 265 minutes of man hours. 265 x 1.25 per minutes [$75 /60] = $331.25. 265x4.16 per

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minutes [250 /60] plus assistant fees and print material cost. Assistant fee is $15-$20 per hour

during the session

One more job costing included is manufacturing overhead. Manufacturing overhead is

an indirect cost. This is also referred to as factory overhead and includes rent, utilities,

equipment, insurance, and taxes

(Averkamp 2016). For the

overhead includes equipment,

communication, marketing,

organization membership fees,

photography studio expenses.

(image by Shoot & Share team,2015)

Total manufacturing overhead is $1,406.92 per month and $ 16,883.00 per year. This chart does

not include the owner’s salary or staff’s health insurance.

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If you add the salary and health insurance costs, the monthly cost is $4,633.59 and $55,603.00

per year.

If a photographer puts the net profit goal at $60,000, the annual sale goal will be $6000 /45% =$

133,333. If the average family session sale is $1000, the photographer should shoot 133.333

clients per year. Manufacturing overhead is $126.90 per shoot. If you put all the information

together, the total cost of one customer, 1 to 25 8’x10’ print order minimum charge will be

Depending on the type of photography, general costs will fluctuate. A wedding photographer

charges $3000 to $4000 for a wedding. The wedding requires longer hours than a private family

session, and it needs at least two photographers to capture a bride, groom, family, and guests.

especially wedding photography, is overpriced. However, the job-costing shows that it is not over

priced. The sale price needs to be set higher than the cost to make a profit as a business.

Craigslist posts claim that photographers are “ripping people off for all they have”(Craigslist

2012). The photography business is customer service oriented. The photographer has to have

business skills and customer management skills in addition to the photography and graphic art

skills. The photographer has to deal with many unreasonable complaints or people seeking

special deals and discounts such as donating a print and valuable time. Knowing and explaining

job-costing and educating the clients and the photographer is important to the job. Because the

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overhead costs are hidden, and a photographer's experience and skills are difficult to determine,

and digital cameras and amateur photographers make photography look easier that it actually is,

the customer feels they are treated unfairly when they have to pay a fair price based on the job-

order costing method.

When customers look at the photographer’s labor and cost, most customers think it is overpriced.

Customers wonder why just a couple hours pushing a button costs between $75 to $250 per hour.

misstated. To become a professional photographer, New York Institute of Photography charges

for 270 hours of a basic course $1,549. A Photoshop course 270 hours for $1,299, wedding

course 150 hours for $899, portrait photography course 150 hours for $899, photography

organizations for photographers. PPA offers certification membership for $323 a year, and also

offers three different degrees to recognize a photographer's level: Photographic Craftsman,

Master of Photography, and Master Artist.(JD photo imaging 2016) To become a Master

Photographer, and Photographic Craftsman, it requires having 26 exhibition merits from

international print competition, plus an additional 24 merits from taking classes, 13 speaking

merits from teaching, and 12 additional merits.(PPA merit & degree 2016). Competition entrance

fee is an average of $125, and a basic one day class costs a minimum of $200 per class. It costs a

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minimum of $10,450 plus 13 free teaching engagements. If the photographer is self-employed,

the photographer also works as an office worker, sales representative, and graphic artist.

Staff photographers that are salary or hourly waged work for hire that belong to a

company are quite different because a staff photographer only takes photographs, and usually,

the company hires a receptionist, sales person, and graphic designer separately. In this case,

calculation of the 8”x10”1 to 24 print cost of goods will be $152.70 plus the staff’s health

The breakdown is an hour consultation with receptionist and photographer, it cost $15 for the

receptionist and $35 for the photographer. For shooting the session, it cost $ 35 per hour for a

photographer. It cost $15 per hour for a sales person. 85 minutes of photographic artwork for a

calculate the price of a product. This cost setting is based on other competitive photographers

pricing and the sale price per print must be lower than competition. Demand- based pricing also

has a problem. It is not a problem if the photographer has just graduated college to be a

photographer, and probably won’t be for several years. The lower price makes the customer

happy, but when the photographer expands their business to get more customers, the

photographer needs more equipment and education. If the photographer stays at customer

demand-based pricing, the business never makes a profit. Knowing how much it costs to create

the order and knowing the cost-based pricing not only helps make a profit in the business, it