Question

The other term for Reverse Cost Method is:

• A. Working backward method
• B. Process costing method
• C. Contract costing method
• D. Labour hour costing method

Hint:

Reverse Cost Method = start from selling price → back-calculate cost.

Answer 1

The Correct Option is A

In cost accounting, the Reverse Cost Method is also known as the Working Backward Method.
This approach is utilized when the final selling price and profit margin are established, but the individual cost components require determination through reverse calculation.
It is frequently employed in sectors producing by-products or joint products, necessitating cost allocation in a reverse sequence.
By employing this backward calculation, businesses can ascertain the cost allocation required for different stages or by-products to achieve predetermined profit targets.
This facilitates accurate cost distribution and optimal pricing strategies.
Consequently, the appropriate designation is the Working backward method.