The financial records of Vanguard Industrial Enterprises for the year ended 31 December 2025 reveal the following details:
| Item | Amount () |
|---|---|
| Cost of raw materials consumed | 180,000 |
| Direct wages paid | 62,000 |
| Factory royalties | 25,000 |
| Factory overhead costs | 50,000 |
| Work-in-progress (1 January 2025) | 48,000 |
| Work-in-progress (31 December 2025) | 53,000 |
*Note:* Direct wages of were accrued and unpaid at the end of the year.
What is the total cost of production to be transferred to the Trading Account for the year?
Answer: 320000 ₦
Answer
The total cost of production transferred to the Trading Account for the year is 320,000.
The cost of production is determined by calculating the total manufacturing cost incurred during the period (Prime Cost of ₦275,000 plus Factory Overheads of ₦50,000 = ₦325,000), adding the opening work-in-progress (₦48,000), and subtracting the closing work-in-progress (₦53,000). Direct wages paid must first be adjusted for accrued wages (₦62,000 + ₦8,000 = ₦70,000). The final cost of production transferred to the Trading Account is ₦320,000.
Step-by-Step Solution
Key Concept
Valuation and Adjustment for Work-in-Progress in Manufacturing Accounts