When Should You Use / Not Use Product Cost by Order?

When Should You Use Product Cost by Order?

• For individual or lot-related production. It is typically used for order-related production or for batch-related process manufacturing. Production is based on orders for which production and the cost analysis of a certain lot size are the priority.

• For test production/start-up production (for planned repetitive manufacturing) for the exact determination of planning data (for example, variance analysis)

• When you want to calculate WIP at actual costs

• When you want to allocate your lot-size-independent costs

• When you want to schedule your orders accurately.

When Should You Not Use Product Cost by Order?

• For repetitive manufacturing (stable and continuous production), since the production of one material is the main priority over a long period of time

• When you want to calculate WIP at target costs

• When you want to calculate WIP (at target costs) and variances at the same time.