In lot-based make-to-stock production, finished or semi-finished products are manufactured based on predicted customer demand to the anonymous inventory. Lot-based production includes lot-based discrete production as well as batch-based process manufacturing. For example, you estimate how many framesets (semi-finished product) you will need to assemble bikes (finished product). Then, you produce these framesets and store them in the anonymous inventory until you need them for subsequent production processes in which the bikes are assembled. Another example is that you produce, for instance, paint with process manufacturing to the anonymous inventory. Again, the paint is withdrawn from the stock for subsequent production processes.
In both cases, you want to manage and analyze the costs based on a particular quantity (production lot size). For this requirement, the production accounting method product cost by order is used.
