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 called the Working Backward Method.
This method is used when the final selling price and profit margin are known, but the cost elements need to be worked out backward.
It is commonly applied in industries where by-products or joint products are produced and costs need to be apportioned in reverse order.
By working backward, firms can calculate how much cost should be assigned to various stages or by-products to meet target profits.
This helps in proper cost allocation and price setting.
Therefore, the correct answer is Working backward method.