D is corrent. This is the correct response because the definition presented is that of backflush costing.
A is incorrect. This response is inappropriate because operation costing refers to a hybrid costing system that blends characteristics of both job-order and process-costing systems. Operation costing is usually applied to batches of similar products where each batch of product is a variation of a single design and requires a sequence of selected operations/activities. An operation costing system would track work in process inventory.
B is incorrect. This response is inappropriate because process costing is a sequential costing system in which the cost of a product/service is obtained by assigning costs to masses of similar units as they are produced and then computing unit costs on an average basis. There would be a tracking of work in process inventory with a process costing system.
C is incorrect. This response is inappropriate because direct or variable costing is a method of inventory costing in which all variable product costs are treated as inventoriable costs and fixed manufacturing overhead is treated as a period cost.
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