Under a backflush costing system, conversion costs are:

A) applied to finished goods inventory.
B) applied to manufacturing overhead only.
C) applied directly to cost of goods sold.
D) applied to finished goods inventory OR applied directly to cost of goods sold.

Under a backflush costing system, conversion costs can be applied directly to cost of goods sold or to finished goods inventory, depending on the specific system design and implementation. The choice between these two options is typically based on the ease and accuracy of tracking conversion costs and the importance of inventory valuation for financial reporting purposes. Thus, both options are possible under this costing system.