backflush costing

Definition

A simplified cost accounting system that records costs only when production is complete, skipping the tedious tracking of work-in-process. It's for manufacturers who prefer speed over precision and assume everything flows smoothly.

Example Usage

We implemented backflush costing in the assembly plant because tracking costs through every production stage was making everyone miserable.

Origin

Management accounting innovation from 1980s-90s, associated with just-in-time manufacturing

Fun Fact

Backflush costing works great when production is fast and consistent, but becomes a nightmare when problems arise and you have no idea where costs actually accumulated.

Source: Cost accounting and manufacturing management terminology

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