‘Backflush Costing’ by organization manufacturing in cells, reducing defects and manufacturing lead time, and ensuring timely delivered of materials, enables purchasing, production and sales to occur in quick succession with minimum inventories.
‘Backflush Costing’ is simplier and less expensive than conventional costing.
It provides concise but comprehensive information than that of conventional costing.
Cost benefit concise may be used for analysis of costs and benefits and benefits might be higher for ‘Backflush Costing’.
‘Backflush Costing’ attempts to remove non value added activities from costing systems, i.e. the cost of tracking work-in-process exceeds the benefits for many companies.
In Just-in-time (JIT) production systems, inventory of work-in-process is typically small compared to the costs of goods produced and sold.
‘Backflush Costing’ is an accounting system that applies costs to products only when production is complete, i.e. when good must appear.