What costing method is suitable for companies producing a wide variety of products?

The job order costing method is particularly suitable for companies that produce a wide variety of products because it allows for tracking costs tied to specific jobs or batches of products. This method is beneficial in environments where products are distinct and customization is often involved, such as in construction, custom manufacturing, or specialty services. Each job is treated as a unique unit, and costs – including materials, labor, and overhead – are accumulated separately for each job.

This allows managers to gain precise insights into the profitability of individual products or projects, facilitating better decision-making and resource allocation. Companies that produce a diverse range of products benefit from this method as it provides the necessary flexibility to accommodate differing requirements and cost structures for each job.