The Just-in-Time (JIT) method is a managerial accounting and inventory management strategy that focuses on reducing or eliminating excess inventory by receiving goods only as needed.
(A) Theory of constraints.
Incorrect: The theory of constraints focuses on identifying and managing bottlenecks in production, not reducing inventory levels.
(B) Just-in-time method. (Correct Answer)
JIT aims to reduce waste, lower storage costs, and improve efficiency by ensuring that materials and products arrive only when needed.
IIA GTAG 3 – Continuous Auditing suggests monitoring inventory controls to align with JIT principles.
(C) Activity-based costing.
Incorrect: Activity-based costing allocates costs to activities based on usage, not inventory reduction.
(D) Break-even analysis.
Incorrect: Break-even analysis calculates the level of sales needed to cover costs but does not focus on inventory management.
IIA Standard 2120 – Risk Management: Encourages auditors to assess cost-management strategies like JIT.
IIA GTAG 3 – Continuous Auditing: Supports real-time monitoring of inventory to minimize excess stock.
Analysis of Each Option:IIA References Supporting the Answer:Thus, the correct answer is (B) Just-in-Time (JIT) method, as it focuses on achieving low or no inventory to optimize efficiency and reduce costs.
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