In which costing method is the total cost divided by the number of items produced to determine item cost?

The method in question, process costing, is particularly suitable for industries that produce large quantities of homogeneous products, such as chemicals, food, and textiles. In process costing, the total production costs are aggregated over a specific time period and then divided by the total number of items produced during that same period. This results in an average cost per unit, which is a straightforward and efficient approach for costing products that are identical or very similar.

This method contrasts with job order costing, which tracks costs by individual jobs or batches and is typically used for customized products. Absorption costing, on the other hand, incorporates fixed and variable manufacturing costs into the total product cost but does not directly refer to dividing total costs by the number of items. Activity-based costing allocates costs to products based on the activities required to produce them, leading to a more detailed analysis, but it doesn't generally involve a simple division of total costs by output in the way process costing does.