Backflush Costing

Backflush Costing

A way to account for the cost of inventory in a just-in-time system. In backflush costing, no costs are accounted until a product is finished. After it is finished, costs are assigned over a period between the time product construction began and the time it finished. That is, costs are "flushed" back into the past. This is useful when a company has low inventory because it is simpler than tracking costs as they occur.
References in periodicals archive ?
This is certainly encouraged by Just-in-Time with its use of backflush costing, but not all companies can or should use JIT.