Question

Angry​ Birds, Inc. designs and builds retaining walls for individual customers. On August​ 1, 2 jobs were in​ process: Level 1 with a beginning balance of​ $12,000 and Level 2 with a beginning balance of​ $8,600. During​ August, Level 3 and Level 4 were started. Levels 1 and 2 were sold at cost plus 30​% during August. All other jobs remained in process at month end. The company applies manufacturing overhead at a rate of ​$9 per direct labor hour. Direct labor wages average ​$10 per hour. The following additional cost information is available for​ August:

	Level 1	Level 2	Level 3	Level 4
Direct Materials	​$1,200	​$8,000	​$2,100	​$3,000
Direct Labor	​$1,800	​$4,800	​$360	​$1,200

The sales staff is paid a​ 2% commission on all sales for the period. The company closes out the total​ over/underapplied manufacturing overhead to Cost of Goods Sold at the end of each month. Calculate the following given actual MOH of​ $8,200 incurred during August. The amount of MOH applied to all jobs in process during August equals ​$ nothing. The adjusted COGS reported on the Income Statement for August equals ​$ nothing. The gross profit reported on the Income Statement for August equals ​$ nothing. The ending work in process balance reported on the Balance Sheet for August equals ​$ nothing. Round final answers to the nearest dollar.

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	1800	4800	360	1200
	Direct labor rate per hour			b	10	10	10	10
	Direct labor hours			c=(a/b)	180	480	36	120
	Predetermined overhead rate			d	9	9	9	9
	MOH applied			(c*d)	1620	4320	324	1080	7344
	The adjusted COGS reported on the Income Statement for August:
	Adjusted cost of goods sold:
					$
	Cost of goods sold			(Note:1)	42340
	Add: Under absorbed overhead				856
	Adjusted cost of goods sold				43196
	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				12000	8600
	Direct Materials				1200	8000
	Direct labor				1800	4800
	MOH applied		(Refer prev. part)		1620	4320
	Total of above=Cost of goods sold				16620	25720	42340
	Total MOH applied to jobs=$ 7344
	Actual MOH=$ 8200
	Applied MOH < Actual MOH, Hence under-absorption
	Under absorbed overhead=Actual MOH-Applied MOH=8200-7344=$ 856
	The gross profit reported on the Income Statement for August:
					$
	Sales revenue			(Note:2)	55042
	Less:Adjusted cost of goods sold				43196
	Gross profit				11846
	Note:2 - Sales revenue
	Sales revenue=Cost of jobs sold+30%=42340+30%=$ 55042
	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				2100	3000
	Direct labor				360	1200
	MOH applied		(Refer first part)		324	1080
	Total of above=Ending WIP				2784	5280	8064