The following balances were extracted from the accounting records of Plateau Manufacturing Ltd for the financial year ended 31 December 2025:
| Accounting Item | Amount (₦) |
|---|---|
| Opening inventory of raw materials | 45,000 |
| Purchases of raw materials | 180,000 |
| Carriage inwards on raw materials | 12,000 |
| Closing inventory of raw materials | 35,000 |
| Direct wages paid (₦5,000 accrued at year end) | 90,000 |
| Direct factory expenses | 28,000 |
| Factory supervisor's salary | 40,000 |
| Depreciation of factory plant | 35,000 |
| Factory power and fuel | 22,000 |
| Opening work-in-progress | 18,000 |
| Closing work-in-progress | 24,000 |
What is the total Cost of Production for the year?
Answer: 416000 ₦
Answer
The Cost of Production for the year is ₦416,000.
The Cost of Production is ₦416,000. It is derived by first calculating Raw Materials Consumed (₦45,000 + ₦180,000 + ₦12,000 - ₦35,000 = ₦202,000). Adding Direct Labor inclusive of accruals (₦90,000 + ₦5,000 = ₦95,000) and Direct Expenses (₦28,000) yields a Prime Cost of ₦325,000. Adding total Factory Overheads (₦40,000 + ₦35,000 + ₦22,000 = ₦97,000) gives total factory costs of ₦422,000. Finally, adjusting for Work-in-Progress (+ ₦18,000 Opening WIP - ₦24,000 Closing WIP) gives ₦416,000.
Step-by-Step Solution
Key Concept
Calculation of Manufacturing Account components including Prime Cost, Factory Overheads, and Work-in-Progress adjustments.