CMA Final · Strategic Cost Management · Back Flush Accounting
Which of the following is a major disadvantage of backflush accounting compared with traditional sequential tracking?
The main disadvantage is a weaker audit trail. Because costs are not tracked through each stage of production, intermediate inventory records are absent, making it harder to trace and verify costs, although the system suits JIT and cuts bookkeeping.
- AIt requires more journal entries for each production stage
- BIt provides a weaker audit trail because intermediate inventory records are absentCorrect
- CIt cannot be used under JIT manufacturing
- DIt always overstates cost of goods sold
Explanation
Backflush costing removes detailed WIP tracking, so there is less trail of costs between purchase and sale. It reduces entries rather than increasing them, it is designed for JIT, and it does not systematically overstate COGS.
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