Backflush costing
Backflush costing records costs at one or two trigger points — product completion or sale — rather than through sequential WIP accounts; it suits just-in-time environments where work-in-progress inventories are negligible.
FrameworkLean operations
See it move
In a just-in-time environment, costs for materials and conversion accumulate quietly while almost no work-in-progress inventory builds up. Rather than posting an entry as goods move from raw materials to WIP to finished goods, backflush costing waits for a trigger — completion or sale — and flushes all the costs to finished goods or cost of goods sold in one step.
Check yourself
A consumer electronics company adopts just-in-time production and is considering backflush costing. Under which condition is backflush costing most appropriate?