how backflush costing works
 flushing costs to the end of the production run eliminates the detailed tracking of expenses such as raw material and labor costs throughout the manufacturing process which is a feature of traditional costing systems this allows the company to simplify its expense tracking processes thus saving accounting and process costs but it may also limit the detail of information that the company retains related to individual costs for production and sales the total costs of a production run are recorded all at once at the end of the process companies using backflush costing therefore primarily work backward calculating the costs of products after they re sold finished or shipped to do this businesses assign standard charges to the goods they produce sometimes costs differ so companies eventually need to recognize the variances in standard costs and actual costs usually the costs of products are calculated during various stages of the production cycle by eliminating work in process wip accounts backflush costing is designed to simplify the accounting process and save businesses money advantages and disadvantages of backflush costingin theory backflushing appears to be a sensible way to avoid the many complexities associated with assigning costs to products and inventory not logging costs during the various production stages enable companies to save time and reduce their expenses companies looking for ways to reduce their bottom lines may use backflush costing but it isn t always an easy accounting method to implement the process of backflush costing makes it difficult for companies to audit because it doesn t always adhere to the basic fundamentals of accounting however backflushing can also be challenging to implement and is not an option available to all companies moreover there are some other big caveats businesses that do backflush costing lack a sequential audit trail and may not always conform to generally accepted accounting principles gaap special considerationscompanies using backflush costing generally meet the following three conditions 