The following balances were extracted from the books of Zenith Manufacturing Works for the financial year ended 31 December 2025:
| Item | Amount (₦) |
|---|---|
| Direct raw materials consumed | 500,000 |
| Direct factory wages paid | 220,000 |
| Accrued direct factory wages at year-end | 30,000 |
| Factory overhead expenses | 180,000 |
| Carriage outwards | 40,000 |
| Work-in-progress (1 January 2025) | 80,000 |
| Work-in-progress (31 December 2025) | 30,000 |
What is the total cost of production to be transferred to the Trading Account for the year?
- A₦880,000
- ₦980,000Answer
- C₦920,000
- D₦1,020,000
Answer
The total cost of production transferred to the Trading Account is ₦980,000.
The cost of production is computed by combining prime cost (direct materials consumed ₦500,000 plus total direct labour of ₦250,000) with factory overheads (₦180,000), giving total manufacturing costs of ₦930,000. Adjusting for work-in-progress by adding opening WIP (₦80,000) and deducting closing WIP (₦30,000) results in ₦980,000.
Step-by-Step Solution
Key Concept
Calculation of Cost of Production in Manufacturing Accounts