A firm uses backflush costing to assign product costs to inventory and values inventory using direct costing. All actual amounts are equal to budgeted amounts. The firm DOES have variable overhead (unlike some other, similar versions of this question). The firm has NO fixed overhead.

Total DM	$1,500
Total DL	$500
Total Variable OH	$500
Total complete & in process	10,000 units
Ending raw materials	$0

The firm has 35 units in finished goods inventory and 25 units in work in process.

Which journal entry appropriately backflushes costs to inventory accounts?

A.

Debit: RIP $3.75

Debit: Conversion Costs $2.50

Debit: Finished Goods $8.75

Credit: COGS $15

B.

Debit: COGS $2.50

Debit: RIP $3.75

Debit: Conversion Costs $2.50

Credit: Finished Goods $8.75

C.

Debit: COGS $15

Credit: RIP $3.75

Credit: Conversion Costs $2.50

Credit: Finished Goods $8.75

D.

Debit: COGS $7.50

Debit: RIP $3.75

Credit: Conversion Costs $2.50

Credit: Finished Goods $8.75