Management Accounting for Electrical Contractors
Job Costing, Overhead, Markup, Break-Even and Work in Progress
FAR 31.202/31.203 and 52.232-5 (acquisition.gov), FHWA engineer's-estimate guide (fhwa.dot.gov/programadmin/contracts/ta508046.cfm), SEC Beginners' Guide, IRS Publication 946 — all read 2026-09-19 · Reviewed 2026-09-21
"Management Accounting" is 2–4 questions on the Business exam. Financial accounting (lesson fl-fin-01) reports to outsiders; management accounting is the arithmetic you use to run the company: what each job actually cost, how overhead gets spread, how much to mark up, where the break-even point sits, and whether a job is over- or under-billed.
1. Direct cost, indirect cost and overhead
- Direct costs are identified with one job and charged straight to it — job labor, labor burden on that labor, material, equipment on the job, subcontracts, permits (FAR 31.202).
- Indirect costs (overhead) are what remains after direct costs are assigned: office rent and staff, estimating, insurance, vehicles not charged to a job, utilities, software. They are collected in cost pools and allocated to jobs on a base that measures the benefit each job received — direct labor dollars, labor hours or total cost input (FAR 31.203). A minor-dollar direct cost may be treated as indirect if that is done consistently.
- A job that recovers only its direct costs earns nothing toward overhead; a bid must carry overhead and profit on top of direct cost.
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