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Difficulty: EasyPreparation of Manufacturing Account and Cost of Production

The following financial figures were extracted from the books of Kemi Manufacturing Enterprises for the year ended 31st December 2025:

- Prime Cost: N150,000\text{N}150,000
- Factory Overheads: N45,000\text{N}45,000
- Opening Work-in-Progress: N12,000\text{N}12,000
- Closing Work-in-Progress: N17,000\text{N}17,000

What is the Cost of Production for the year?

Answer: 190000 Naira

Answer

The Cost of Production is 190,000 Naira.
The Cost of Production is calculated using the formula: Prime Cost + Factory Overheads + Opening Work-in-Progress - Closing Work-in-Progress. Substituting the values: N150,000+N45,000+N12,000−N17,000=N190,000\text{N}150,000 + \text{N}45,000 + \text{N}12,000 - \text{N}17,000 = \text{N}190,000.

Step-by-Step Solution

1
Add Factory Overheads to Prime Cost
N150,000+N45,000=N195,000\text{N}150,000 + \text{N}45,000 = \text{N}195,000
Factory overheads are added to prime cost to determine the total factory cost before work-in-progress adjustments.
2
Add Opening Work-in-Progress
N195,000+N12,000=N207,000\text{N}195,000 + \text{N}12,000 = \text{N}207,000
Opening work-in-progress represents unfinished goods from the previous period completed in the current period.
3
Deduct Closing Work-in-Progress
N207,000−N17,000=N190,000\text{N}207,000 - \text{N}17,000 = \text{N}190,000
Closing work-in-progress represents unfinished goods at the end of the period and must be deducted to find the cost of fully produced goods.

Key Concept

Calculation of Cost of Production from Prime Cost, Factory Overheads, and Work-in-Progress adjustments.
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Topics

Preparation of Manufacturing Account and Cost of Production

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