Question

Sway With the​ Breeze, LLC builds custom treehouses. On March​ 1, 2 jobs were in​ process: Oak, with a beginning balance of​ $12,000, and​ Poplar, with a beginning balance of​ $8,600. During​ March, two other jobs were​ started: Magnolia and Pine. During​ March, Oak and Magnolia were sold at cost plus​ 30%. Poplar and Pine remained in process at month end.

During March, the following costs were incurred for each job: Oak Poplar Magnolia Direct materials $1,200 $8,000 $2,100 Direct labor* $1,800 $4,800 $360 *Direct labor wages average $20 per direct labor hour. Pine $3,000 $1,200 The company uses a traditional, normal costing system to allocate manufacturing overhead to production. The predetermined manufacturing overhead rate calculated at the beginning of the year was $5 per direct labor hour. Actual manufacturing overhead for March was $2,000. Given that MOH is closed to cost of goods sold at the end of each month, which of the following statements is correct? A. Two of the jobs were "completed but not sold" at the end of March. B. The sales revenue for the month was $23,348. C. The gross profit reported on March's income statement was $5,440. D. The ending work in process inventory reported on March's balance sheet was $7,050. E. Manufacturing overhead was underallocated by $260 during March.

Answer 1

	Job cost details for March
	Particulars	Oak	Poplar	Magnolia	Pine	Total
a	Opening WIP	$              12,000	$              8,600			$           20,600
	Costs Incurred in March
b	Direct Materials	$                1,200	$              8,000	$               2,100	$                3,000	$           14,300
c	Direct Labor cost	$                1,800	$              4,800	$                  360	$                1,200	$              8,160
d	Direct Labor cost/Hr =	$                     20	$                    20	$                    20	$                     20
e	Direct Labor Hours =c/d	90.00	240.00	18.00	60.00	408.00
f	Predetermined Mfg OH applied @$5 /Direct labor Hr =e*5=	$                   450	$              1,200	$                    90	$                   300	$              2,040
g	Total Cost Incurred in March =b+c+f	$                3,450	$            14,000	$               2,550	$                4,500	$           24,500
h	Total Cost of Jobs =a+g	$              15,450	$            22,600	$               2,550	$                4,500	$           45,100
	Job status at March end	Sold	WIP	Sold	WIP

Manufacturing Overhead applied	$                2,040
Actual Manufacturing OH Incurred	$                2,000
Manufacturing OH Overapplied	$                   400

Sales Details	Oak	Magnolia	Total
Cost of Jobs	$              15,450	$              2,550	$             18,000
Less : Mfg Overhead Overapplied			$                   (40)
Net Cost of Goods Sold			$             17,960
Sales Price with 30% mark up on Job cost =	$              20,085	$              3,315	$             23,400
Gross Profit			$               5,440
WIP Details	Poplar	Pine	Total
WIP Inventory cost	$              22,600	$              4,500	$             27,100

Statements
A: Is incorrect as two jobs were in WIP not "Completed but not sold "at March end.
B: Is incorrect as sales revenue for March is $23,400
C: Is correct as Gross Profit for March is $5,440
D: Is incorrect as ending WIP of March is valued at $27,100
E: Is incorrect as Mfg OG was overapplied by $40