West Allis Bike Shop Uses a Backflush-Costing System to Account

question 39

Multiple Choice

West Allis Bike Shop 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,West Allis Bike Shop purchased $6,000 of direct materials and incurred $3,000 in conversion costs to produce 40 bicycles.The journal entry to record the purchase of materials includes a Debit to ________.

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

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Definitions:

Unstructured Problem

A problem that lacks clear definition and solution paths, often requiring creative and critical thinking for resolution.

Technological Problem

Issues or challenges related to the application or development of technology within various contexts, often requiring specific solutions or innovations.

Production Possibilities Frontier

A graphical representation showing the maximum quantity of different goods that a society can produce with its available resources and technology, assuming efficient use of resources.

Opportunity Cost

The cost involved when the second most advantageous option is not selected during decision-making.