Backflush costing Durham Denim uses backflush costing to account for production costs of its one-size-fits-all ponchos. During August, the firm produced 270,000 ponchos and sold 268,200. The standard cost for each poncho is: $2 Direct material Conversion costs 4 Total cost $6 The firm had no inventory on August 1. The following events took place in August: Purchased $543,600 of direct material Incurred $1,094,400 of conversion costs Applied $1,080,000 of conversion costs to Raw and In-Process Inventory Finished 270,000 ponchos Sold 268,200 ponchos for $10 each