Backflush costing systems assume that conversion-cost account balances should be approximately zero at all times.

Question

Quizplus · Accepted Answer

Backflush costing systems are designed to simplify the accounting process by delaying the recording of costs until they are needed. The assumption is that conversion costs (the costs of converting raw materials into finished products) will be incurred evenly throughout the production process, and therefore, any imbalance between actual and expected costs will be corrected by periodically "flushing" out the system. As a result, conversion-cost account balances should be close to zero at all times.

Backflush Costing Systems Assume That Conversion-Cost Account Balances Should Be