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CMA Final · Strategic Cost Management · Back Flush Accounting

Which statement about back flush accounting is correct in a JIT environment?

Back flush accounting avoids detailed sequential tracking through work-in-process and instead applies standard costs to output at trigger points such as completion or sale. It suits JIT environments with low inventory and short cycle times, and it relies on standard costs.

  1. AIt removes the need for detailed tracking of costs through WIP, using standard costs triggered by events such as completion or saleCorrect
  2. BIt requires cost to be recorded at every stage of production through a work-in-process account
  3. CIt is best suited to firms with long production cycles and large inventories
  4. DIt eliminates the need for standard costs, since actual costs are posted after sale

Explanation

Back flush costing works backward from output, applying standard costs at trigger points, so it suits JIT with low inventories and short cycles. Sequential tracking through WIP is the traditional method, not back flushing. It depends on standard costs rather than removing them.

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