The JIT environment has caused a reassessment of product costing techniques.Which of the following statements is true with respect to this reassessment?
A)Traditional cost allocations based on direct labor are being questioned and criticized.
B)The federal government,through the SEC,is responsible for the reassessment.
C)The reassessment is caused by the replacement of machine hours with labor hours.
D)None of the above is true.

Question

Quizplus · Accepted Answer

JIT (Just-In-Time) environment emphasizes on smooth production flow with minimal inventory and wastes. As a result, traditional cost allocations based on direct labor are being questioned and criticized. Businesses are looking for alternative methods to allocate costs, such as activity-based costing (ABC), which considers all activities involved in the production process. B is incorrect as the reassessment is not initiated by the federal government or the SEC. C is also incorrect as the trend is towards moving away from labor-based allocations.

The JIT Environment Has Caused a Reassessment of Product Costing