Backflush costing
Backflush costing in Supply Chain Management cover the following tasks:
It allows simplified reporting on material and operation resources, such as reporting consumption on empty bins or else not reporting consumptions and eliminating the need for reporting usage of operation resources
Values the production flow output (quantities produced) at the product's standard cost.
Absorbs and applies to the production flow's WIP account, the standard conversions costs (direct and indirect manufacturing cost) for the production outputs from a production flow.
Allows an end-of-period backflush costing process, for computing the variances to standard cost for quantities of products that are produced for the period, and the correction of the financial situation (relative to the omitted journal entries for the product cycle).
Performs BOM calculation for items that are produced through production flows.
Accounts for moving direct material cost to work in progress, for products that are contributed to production flow, but whose physical flow in the production flow is not reported or maintained in simplified backflush costing journal entries.
Performs cost accounting through substituting the production flow definition for routes.
Performs cost accounting of the direct material cost resulting from products whose physical flow in the production flow is maintained through on-hand inventory (no backflush).
The periodic consolidation of the cost for a production flow or backflush costing recalculates the actual cost of material and products in WIP based on the status of kanban jobs and handling units in the production flow and determines variances for the products that are supplied by the production flow.
End of period - backflush costing
At the end of a costing period, backflush costing is run for the period for all production flows of the legal entity in the same batch run. When backflush costing calculation is started, the last date of the backflush costing period must be selected. Backflush costing is run either from the Backflush costing calculation page or as a batch job.
Unless the job is started at the end of the manufacturing day, you should always select a day in the past for the job. It is not possible to post transactions to a period (day) where the backflush costing calculation was run.
The backflush costing process implements the following steps:
Determine the production flow's unused quantities as of the period end date.
Calculate the production flow's net realized usage over the period.
Clear the WIP from the realized resource consumptions and products.
Calculate the production variances to standard cost for each cost group.
After the backflush costing process is run, the unused quantities at the date of the costing run can be viewed from the production flow's WIP display.