Angry Birds, Inc. designs and builds retaining walls for individual customers. On August 1, 2 jobs...

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Angry Birds, Inc. designs and builds retaining walls for individual customers. On August 1, 2 jobs were in process: Level 1 w

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Answer 1

Answer #1

The amount of MOH applied to all jobs in process during August :
		Level 1	Level 2	Level 3	Level 4	Total
Direct labor	a	$ 1,800	$ 4,800	$ 360	$ 1,200
Direct labor rate per hour	b	$ 10	$ 10	$ 10	$ 10
Direct labor hours	c=(a/b)	180	480	36	120
Predetermined overhead rate	d	$ 11	$ 11	$ 11	$ 11
MOH applied	*(cd)**	$ 1,980	$ 5,280	$ 396	$ 1,320	$ 8,976

The adjusted COGS reported on the Income Statement for August:
Adjusted cost of goods sold:
	(Note:1)
Cost of goods sold	$ 43,660
Less: Over absorbed overhead	$ -776
Adjusted cost of goods sold	$ 42,884

Note:1- cost of goods sold
Cost of goods sold=Cost of jobs sold=Cost of level 1 and 2
	Level 1	Level 2	Total
Beg. Bal	$ 12,000	$ 8,600
Direct Materials	$ 1,200	$ 8,000
Direct labor	$ 1,800	$ 4,800
MOH applied	$ 1,980	$ 5,280
Total of above=Cost of goods sold	$ 16,980	$ 26,680	$ 43,660

Total MOH applied to jobs	$ 8,976
Actual MOH	$ 8,200
Over absorbed overhead	$ 776
Applied MOH < Actual MOH, Hence under-absorption


The gross profit reported on the Income Statement for August:
	(Note:2)
Sales revenue	$ 56,758
Less:Adjusted cost of goods sold	$ 42,884
Gross profit	$ 13,874

Note:2 - Sales revenue
Sales revenue=Cost of jobs sold+30% (43660*130%)		$ 56,758

The ending work in process balance reported on the Balance Sheet for August:
Ending work in process balance=Cost of jobs incomplete=Cost of level 3 &4

	Level 3	Level 4	Total
Direct Materials	$ 2,100	$ 3,000
Direct labor	$ 360	$ 1,200
MOH applied	$ 396	$ 1,320
Ending WIP	$ 2,856	$ 5,520	$ 8,376

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Answer 2

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