Q.12) A company 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, but 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: COGS $15 Credit: RIP $3.75 Credit: Finished Goods $8.75

b.Debit: COGS $7.50 Debit: RIP $3.75 Credit: Conversion Costs $2.50 Credit: Finished Goods $8.75

c.Debit: COGS $2.50 Debit: RIP $3.75 Debit: Conversion Costs: $2.50 Credit: Finished Goods $8.75

d.Debit: RIP $3.75 Debit: Conversion Costs $2.50 Credit: COGS $15