How Hybrid costing systems look like?

The FIFO method of process costing can be combined with standard costs so that a “normal” production cost is assigned each period to equivalent units of output. This technique allows managers to quickly recognize and investigate significant deviations from normal production costs.

Hybrid costing systems allow companies to combine the characteristics of both job order and process costing systems. Direct material or direct labor that is related to a particular batch of goods can be traced to those specific goods using job order costing. Cost components that are common to numerous batches of output are accounted for using process costing techniques.

A hybrid costing system is appropriate for companies producing items such as furniture, clothing, or jam. In each instance, numerous kinds of raw materials could be used to create similar output.  The material cost for a batch run would need to be traced separately, but the production process of the batch is repetitive.

Hybrid costing systems allow accounting systems to portray more accurately the actual type of manufacturing activities in which companies are engaged. Job order costing and process costing are two ends of a continuum and, as is typically the case for any continuum, neither end is necessarily the norm. As flexible manufacturing increases, so will the use of hybrid costing systems.