Question

A company would typically use backflushing

		when inventory levels are kept at a minimum (such as in just-in-time-JIT)
		when inventory levels are kept at a maximum (such as in a tradition inventory manufacturing system)
		when manufacturing costs are flushed
		both a and b

Which of the following is not an assumption of cost-volume-profit analysis?

		Selling prices change only at the end of the month
		Costs can be thought of as fitting a linear function within the relevant range
		Sale mix is constant
		Inventory levels do not change

For financial statements reporting purposes, what method complies with GAAP and IRS?

		varible costing
		traditional costing
		absorption or full costing
		both b and c

Answer 1

Solution 1) A company would typically use backflushing

The Correct Option is when inventory levels are kept at a minimum (such as in just-in-time-JIT)

Explanation: Backflush Costing technique is only suitable for the companies having low or constant inventory.

Solution 2) Which of the following is not an assumption of cost-volume-profit analysis?

The Correct Option is Selling prices change only at the end of the month.

Explanation: In CVP Analysis, it is assumed that the Selling Price remains constant.

Solution 3) For financial statements reporting purposes, what method complies with GAAP and IRS?

The Correct Option is both b and c

Explanation: Both Traditional Costing and Absorption or Full Costing comply with GAAP and IFRS.