Final answer:
Job costing is a system used to record the flow of costs for each job or customer, and it's used beyond manufacturing. It differs from process costing by tracking individual costs rather than equally distributing them. Moreover, firms have fixed costs and variable costs, the latter of which change with output levels.
Step-by-step explanation:
The concept in question is job costing, which is a system used to assign costs to an individual job or customer. Contrary to what the question misstated, job costing is not exclusive to manufacturing; it is also used in various service industries. The hallmark of job costing is that it records the flow of costs for each customer or job, tracking materials, labor, and overhead to determine the total cost incurred for a specific job or customer. This approach contrasts with process costing, which allocates an equal amount of cost to each unit made during a time period and is more suited to situations where each unit of output is identical.
In a short-run perspective, a firm's total costs can be divided into fixed costs and variable costs. Fixed costs, such as rent or salaries of permanent staff, are considered sunk costs—they have already been incurred and cannot be changed. They should not influence future production or pricing decisions. On the other hand, variable costs, such as labor and raw materials, vary with the level of output. These costs typically demonstrate diminishing marginal returns; thus, as more is produced, the marginal cost of production generally increases.