Banana Seat Company Uses a Backflush- Costing System to Produce

Banana Seat 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, Banana Seat Company purchased $6,000 of direct materials and incurred $3,300 in conversion cost to produce 40 units. The entry to eliminate the conversion cost variance includes a debit to:

A) Costs of Goods Sold for $300
B) Finished- Goods Inventory for $300
C) Conversion Costs for $300
D) None of these answers is correct.

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