What costing approach may utilize a standard cost system?

The utilization of a standard cost system is commonly associated with job order costing. In a job order costing system, costs are tracked by individual jobs or orders, which allows for more precise control and analysis of expenses. Standard costs are pre-established costs for direct materials, direct labor, and overhead based on historical data and expectations. This enables the organization to compare actual costs incurred for each job against these standard costs.

By implementing a standard cost system within job order costing, organizations can quickly assess variances and manage costs more effectively. This approach is particularly useful in situations where products are customized, and it facilitates the setting of performance benchmarks, thereby aiding in financial planning and efficiency improvements.

Meanwhile, other costing approaches may not rely as heavily on standard cost systems. For instance, process costing is typically used for homogeneous products produced in continuous processes, making it less reliant on job-specific standards. Variable costing focuses on the costs that vary with production levels and may not incorporate standards in the same way. Absorption costing includes all manufacturing costs in the cost of a product but does not directly associate itself with the establishment of standards to the same extent as job order costing with a standard cost system.