Materials cost flows The Petosky Manufacturing Company uses a perpetual inventory system to account for all inventory transactions. The firm's Raw Materials Inventory account balance on January 1 was $46,760. During the year, the company purchased $178,900 of raw materials. Material requisitions were filled for $125,300 of direct materials and $21,500 of indirect materials. Returned materials reports totaling $7,880 were filed during the year. A year-end inventory count reveals an ending balance in the Raw Materials Inventory account of $77,350.

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REQUIRED a. Compute the December 31 balance in the Raw Materials Inventory account without regard to the physical inventory count. b. Calculate the cost of materials actually used in production during the year. c. Calculate the amount of adjustment needed to correct the Raw Materials Inventory Control account so that it conforms to the year-end inventory count. d. What are some possible explanations for the inventory differences?