Flat 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, Flat purchased $9,000 of direct materials and incurred $5,300 in conversion cost to produce 40 units.The 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

Question

Quizplus · Accepted Answer

A backflush-costing system does not maintain any inventory and applies the costs directly to the cost of goods sold. Therefore, the entry to record the purchase of materials includes a debit to Materials Inventory.

Flat Company Uses a Backflush-Costing System to Produce Bicycles