Which inventory accounting method reduces the book inventory automatically after completion of activity on a component's upper-level item based on what should have been used as specified on the BOM?

• A. Backhaul
• B. Backorder
• C. Backflush
• D. Assemble-2-order

Answer: (C)

Backflushing is an inventory accounting method where material issues aren’t recorded as they happen on the shop floor. Instead, when the production on a component’s upper-level item is completed, the system automatically reduces the on-hand quantities of its components using the bill of materials. This method ties the book inventory to what should have been consumed according to the BOM, making the update automatic and efficient after production. It works best in high-volume, standardized production environments where the actual usage closely matches the BOM. If actual consumption differs due to scrap, rework, or changes, variances can arise, requiring later reconciliation.