Wheels Company Uses a Backflush- Costing System to Produce Bicycles

question 78

Multiple Choice

Wheels Company uses a backflush- costing system to produce bicycles. Bicycles are scheduled for production only after orders are recorded and products are shipped to customers immediately upon completion. No finished goods inventory is maintained and product costs are applied directly to cost of goods sold. Standard cost for materials and conversion is $150 and $75, respectively. During the current month, Wheels purchased $6,000 of direct materials and incurred $3,300 in conversion cost to produce 40 units. The entry to record the purchase of materials includes a debit to:

• A) Finished- Goods Inventory
• B) Materials Inventory
• C) Work- in- Process Inventory
• D) Cost of Goods Sold

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Definitions:

Consumer's Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay, representing the benefit consumers receive from the purchase.

Earplugs

Small devices inserted into the ear canal to protect the ears from loud noises, water, or foreign bodies.

Consumer's Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service versus the total amount they actually pay.

Earplugs

Small devices inserted into the ear canal to protect the ears from loud noises, water, or to block out sound for concentration or sleep.