Backflush costing has only two categories of costs: materials and conversion costs.

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Backflush costing is a simplified costing method used in just-in-time (JIT) environments. It only has two categories of costs: materials and conversion costs. Materials include all the raw materials and components used in the production process, while Conversion costs include all the manufacturing costs, including direct labor and manufacturing overhead.

Backflush Costing Has Only Two Categories of Costs: Materials and Conversion