Which costing method is typically used by manufacturing companies that mass produce large volumes of products?

The method typically used by manufacturing companies that mass produce large volumes of products is process costing. This costing approach is designed to allocate costs to products that are produced in a continuous flow, such as in industries like chemicals, textiles, or food production.

In process costing, costs are accumulated for each department or process involved in production over a specific period. Since products are indistinguishable from one another, the costs associated with the production processes are averaged over all units produced, allowing the company to determine the cost per unit effectively. This is particularly efficient for companies that produce standardized products in large quantities, where tracking individual jobs or batches would be impractical.

By employing process costing, manufacturers can streamline their cost accounting while also gaining insights into production efficiency and costs associated with each process, assisting in budgeting, pricing, and financial forecasting. This method contrasts with others such as job order costing, which is better suited for custom or small volume production where costs are tracked for each specific job.