Final answer:
Job costing tracks the flow of costs for specific jobs or customers and is used across various industries, not just in manufacturing. It allocates costs based on actual resource consumption rather than equally across all units produced. Fixed costs are sunk and do not change with output, while variable costs fluctuate and typically increase as output rises.
Step-by-step explanation:
The student's question pertains to job costing, which is an accounting method used to track the costs associated with a specific job or project. Contrary to one of the options provided (A), job costing is not limited to manufacturing; it can also be applied in service industries and construction where each project is different and requires individual costing. Option (B) accurately describes job costing as it records the flow of costs for each job or customer, ensuring each project's costs are tracked separately. Option (C) is incorrect because job costing does not allocate an equal amount of cost to each unit; instead, costs are allocated based on the actual resources used for each job. Finally, option (D) is also incorrect, since job costing is typically not used when each unit of output is identical; in such cases, process costing would be more appropriate.
From a short-run perspective, total costs can be divided into fixed costs and variable costs. Fixed costs are those that do not change with the level of output and are considered sunk costs. They should not influence future economic decisions. On the other hand, variable costs fluctuate with the level of output and typically show diminishing marginal returns, leading to a rise in marginal cost as output increases.
Variable costs include costs of labor and raw materials, as they are directly associated with the level of production and change according to the amount produced. Hence, as more goods or services are produced, the requirement for labor and raw materials increases, thus increasing the variable costs.