Ready Tire Corporation makes several lines of automobile and truck tires. The company operates in a competitive marketplace, so it relies heavily on cost data from its FIFO-based process costing system. It uses that information to set prices for its most competitive tires. The company's radial line has lost some of its market share during each of the past four years. Management believes that price breaks allowed by the company's three biggest competitors are the main reason for the decline in sales.
The company controller, Sara Birdsong, has been asked to review the product costing information that supports price decisions on the radial line. In preparing her report, she collected the following data for the most recent full year of operations:

Units started and completed during the year totaled 80,400. Attached to the beginning Work in Process Inventory account were direct materials of $123,660 and conversion costs of $57,010. Birdsong found that little spoilage had occurred. The proper cost allowance for spoilage was included in the predetermined overhead rate of $2 per direct labor dollar. The review of direct labor costs revealed, however, that $90,500 had been charged twice to the production account, the second time in error. This resulted in overly high overhead costs being charged to the production account.
So far this year, the radial has sold for $92 per tire. This price was based on the most recent operations unit data plus a 75 percent markup to cover operating costs and profit. During the year, Ready Tire's three main competitors have charged about $87 for a tire of comparable quality. The company's process costing system adds all direct materials at the beginning of the process, and conversion costs are incurred uniformly throughout the process.
1. Identify what inaccuracies in costs, inventories, and selling prices result from the company's cost-charging error.
2. Prepare a revised process cost report for the most recent full year of operations. Round unit costs to two decimal places. Round total costs to whole dollars.
3. What should have been the minimum selling price per tire this year?
4. Suggest ways of preventing such errors in the future.

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Units 84,200 82,800 Dollars Equivalent units Direct materials Conversion costs Direct materials Direct labor Overhead Direct materials Conversion costs Beginning (70% complete) Ending (30% complete Manufacturing costs $1,978,700 800,400 1,600,800 23.50 29.00 Unit cost data Work in process inventory: 4,200 3,800