Wheels Company Uses a Backflush-Costing System to Account for Bicycles

question 130

Multiple Choice

Wheels Company uses a backflush-costing system to account for bicycles.Bicycles are scheduled for production only after orders are received 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.The standard cost for materials is $150 per bicycle.The standard cost for conversion costs is $75 per bicycle. During the current month,Wheels Company purchased $6,000 of direct materials and incurred $3,000 in conversion costs to produce 40 bicycles.The journal entry to eliminate the conversion cost variance includes a debit to ________.

• A)Finished Goods Inventory for $600
• B)Conversion Costs for $600
• C)Cost of Goods Sold for $600
• D)No entry is needed

---

Definitions:

Withdraws

Money taken out of a business by its owner(s) for personal use.

Partnership

A business structure where two or more individuals share ownership, as well as the profits or losses of the business.

Capital Balances

The amount of money or value of assets that a company or an individual has invested in a business.

Net Income

The profit of a company after all expenses, including taxes and operating costs, have been subtracted from total revenues.