You are engaged in the audit of the December 31, 2013, financial statements of Epworth Products
Corporation. You are attempting to verify the costing of the work-in-process and finished goods ending inventories that were recorded on Epworth's books as follows: Materials are added to production at the beginning of the manufacturing process, and overhead is applied to each product at the rate of 60 percent of direct labor costs. Epworth uses the FIFO costing method. A review of Epworth's 2013 inventory cost records disclosed the following information: Required: Prepare a production cost report to verify the inventory balances. What is the amount of potential understatement or overstatement of the ending work-in-process account?

Question

You are engaged in the audit of the December 31, 2013, financial statements of Epworth Products
Corporation. You are attempting to verify the costing of the work-in-process and finished goods ending inventories that were recorded on Epworth's books as follows:  Materials are added to production at the beginning of the manufacturing process, and overhead is applied to each product at the rate of 60 percent of direct labor costs. Epworth uses the FIFO costing method. A review of Epworth's 2013 inventory cost records disclosed the following information:  Required: Prepare a production cost report to verify the inventory balances. What is the amount of potential understatement or overstatement of the ending work-in-process account?

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The Answer of You are engaged in the audit of the December 31, 2013, financial statements of Epworth Products
Corporation. You are attempting to verify the costing of the work-in-process and finished goods ending inventories that were recorded on Epworth's books as follows:  Materials are added to production at the beginning of the manufacturing process, and overhead is applied to each product at the rate of 60 percent of direct labor costs. Epworth uses the FIFO costing method. A review of Epworth's 2013 inventory cost records disclosed the following information:  Required: Prepare a production cost report to verify the inventory balances. What is the amount of potential understatement or overstatement of the ending work-in-process account?

You Are Engaged in the Audit of the December 31