Final answer:
In product costing, costs from pools are allocated to cost objects, using mathematical models to predict and compare costs of materials, manufacturing, and maintenance, normalized per unit, such as cost per thousand gallons of water.
Step-by-step explanation:
The basic approach in product costing is to allocate costs in the cost pools to individual cost objects. In order to effectively estimate and compare the costs associated with different products or services, mathematical models are often used. These models facilitate the prediction and assessment of costs through the various stages of idea generation and design processes.
During this phase, costs associated with materials, fabrication or manufacturing, operation, and maintenance are taken into account. These costs must be normalized to allow comparison between different alternatives. A common normalization is to compare the cost per thousand gallons of water, as this allows an even comparison regardless of the scale of the different options under consideration.