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:

Units Cost

WIP 300,000 $860,000

(50% complete as to labor and overhead)

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:

Units Materials Labor

WIP, Jan. 1, 2013 200,000 $200,000 $315,000 (80% complete as to labor

and overhead)

Started 1,000,000

Completed 900,000

Current period costs $1,300,000 $1,991,375

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?