Answer (A) is correct . In a JIT system, materials go directly into production without being inspected. The assumption is that the vendor has already performed all necessary inspections. The minimization of inventory reduces the number of suppliers, storage costs, transaction costs, etc. Backflush costing eliminates the traditional sequential tracking of costs. Instead, entries to inventory may be delayed until as late as the end of the period. For example, all product costs may be charged initially to cost of sales, and costs may be flushed back to the inventory accounts only at the end of the period. Thus, the detail of cost accounting is decreased.
Answer (B) is incorrect because The detail of costs tracked to jobs will also decrease.
Answer (C) is incorrect because Inspection costs will also decrease.
Answer (D) is incorrect because Both inspection costs and the detail of costs tracked to jobs will decrease.
|
