PART TWO INSTRUCTIONS MANUFACTURING PROCESS INFORMATION Pete Paydirt, the CEO of Pete's Patriotic Flags, Inc. has begun a small manufacturing process that will manufacture United States and Texas Flags and then sell the flags to merchandising companies. The manufacturing process starts with the cutting and edging of the fabric. Once the fabric is cut, inspected, and approved then it is attached to the flagpole. The flagpole will be attached as the final step in the process. Once the flags are completed, they are then transferred to finished goods. This is a process cost system, and the company elects to use the FIFO method of accounting for product costs. Direct material-fabric is added 100% at the beginning of the process. Direct material-poles are added 100% as the last step in the manufacturing process. Conversion costs are added equally throughout the process. Conversion is 40% complete for the beginning inventory work in process and 60% complete for the ending inventory work in process. At the beginning of the accounting period, Pete estimates that production will be 160,000 units during the year. The predetermined overhead rate is based on an estimated FOH of $6,552. Overhead is applied to production on the basis of direct labor hours. This information is to be used to determine the application rate for overhead. Estimated and actual direct labor costs totaled $9,360 which is calculated at $10.00 per hour. Actual factory overhead costs totaled $1,050,000. Beginning Work-In-Process costs totaled $0 since this is the first month of production. The following information is available concerning direct materials. Direct Materials-Fabric Beginning inventory Purchase of fabric The company starts 160,000 units Direct Material-Poles Beginning inventory Purchase of poles 0 yards @ $11.00 per yard 340,000 yards - @ $11.00 per yard = 3,740,000 2 square yards of fabric makes one flag = $83,095 1896 O poles 160,000 poles @ $50.00 per pole = 8,000,000 The Work-in-Process account has the following information: Ending work in process inventory is 100% complete as to fabric Ending work in process contains 10,000 equivalent units Ending work in process is 60% complete to conversion costs The Finished Goods account has the following Information: The finished goods inventory on January 1, 2021, had a balance of 0 flags at a cost of $0 and on December 31, 2021 had an ending balance of 250 flags. The selling price of the flags is $110.00. Selling and Administrative Costs totaled $500,000; tax rate is 30%.