Match each manufacturing accounting transaction or component adjustment on the left with i… — JAMB UTME

Match each manufacturing accounting transaction or component adjustment on the left with its correct financial treatment or resulting calculation on the right.

Adjustment for direct carriage on raw materials of $₦15,000$ and accrued direct factory wages of $₦25,000$ Add $₦40,000$ in total to the basic raw materials purchased and direct labor to determine Prime Cost
Cost of Production calculation when factory overheads are $₦120,000$ , opening Work-in-Progress is $₦35,000$ , and closing Work-in-Progress is $₦45,000$ Add a net amount of $₦110,000$ to Prime Cost
Market value transfer of finished goods when Cost of Production is $��500,000$ and manufacturing profit is $20\%$ on costDebit the Trading Account with $₦600,000$ as cost of finished goods transferred
Provision for unrealized profit when closing inventory of finished goods valued at market price ( $25\%$ mark-up on cost) is $₦75,000$ Set up a provision for unrealized profit of $₦15,000$ deducted from closing inventory on the Balance Sheet

Answer

Direct costs adjustments add

₦40,000

to Prime Cost; factory overheads and Work-in-Progress net to adding

₦110,000

to Prime Cost; market value transfer equals

₦600,000

debited to Trading Account; and provision for unrealized profit equals

₦15,000

Each item accurately maps to its double-entry or financial statement presentation rule: direct expenses and direct labor additions increase Prime Cost; factory overheads combined with opening WIP minus closing WIP adjust Prime Cost to arrive at Cost of Production; transfer at market value includes manufacturing profit debited to Trading Account; and unrealized profit on closing inventory is isolated using the margin ratio derived from mark-up.

Step-by-Step Solution

Calculate Prime Cost adjustments

Direct carriage (

₦15,000

) and accrued direct labor (

₦25,000

) are direct expenses and direct wages respectively. Adding them gives

₦40,000

added to Prime Cost components.

Direct costs form part of Prime Cost before adding overheads.

Calculate net overhead and Work-in-Progress adjustment to Prime Cost

\text{Factory Overheads} + \text{Opening WIP} - \text{Closing WIP} = ₦120,000 + ₦35,000 - ₦45,000 = ₦110,000

Cost of Production = Prime Cost + Factory Overheads + Opening WIP - Closing WIP.

Determine market value transfer of completed goods

\text{Market Value} = ₦500,000 + (0.20 \times ₦500,000) = ₦600,000

Finished goods transferred at market value are debited to the Trading Account at Cost of Production plus Manufacturing Profit.

Calculate provision for unrealized profit on closing inventory

\text{Margin} = \frac{\text{Mark-up}}{100 + \text{Mark-up}} = \frac{25}{125} = 20\%

\text{Unrealized profit} = 20\% \times ₦75,000 = ₦15,000

Closing inventory at market value must be reduced by the profit element to state it at actual production cost on the Balance Sheet.

Key Concept

Preparation of Manufacturing Account and Cost of Production

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