Apex Manufacturing Enterprise provided the following extract from its financial records fo… — JAMB UTME

Apex Manufacturing Enterprise provided the following extract from its financial records for the year ended 31 December 2025:

- Opening stock of raw materials: $\text{₦}45,000$
- Purchases of raw materials: $\text{₦}180,000$
- Carriage inwards on raw materials: $\text{₦}15,000$
- Closing stock of raw materials: $\text{₦}35,000$
- Direct factory wages: $\text{₦}120,000$
- Factory power and fuel: $\text{₦}40,000$
- Depreciation of factory equipment: $\text{₦}25,000$
- Work-in-progress (1 January 2025): $\text{₦}18,000$
- Work-in-progress (31 December 2025): $\text{₦}23,000$

What is the total cost of production for the year?

Answer: 385000 ₦

Answer

The total cost of production for the year is ₦385,000.

The correct cost of production is computed by combining raw materials consumed (₦205,000), direct wages (₦120,000), and factory overheads (₦65,000) to arrive at manufacturing costs before WIP adjustments (₦390,000), then adding opening work-in-progress (₦18,000) and deducting closing work-in-progress (₦23,000), yielding exactly ₦385,000.

Step-by-Step Solution

Determine the cost of raw materials consumed

Raw Materials Consumed = ₦45,000 + ₦180,000 + ₦15,000 - ₦35,000 = ₦205,000

Carriage inwards is added to raw materials purchases while closing stock of raw materials is subtracted from total materials available for use.

Calculate the Prime Cost

Prime Cost = Direct Materials Consumed (₦205,000) + Direct Factory Wages (₦120,000) = ₦325,000

Prime Cost consists of all direct manufacturing costs including direct raw materials and direct labor.

Determine Total Factory Overheads

Factory Overheads = Factory Power and Fuel (₦40,000) + Depreciation of Factory Equipment (₦25,000) = ₦65,000

Factory overheads encompass all indirect expenses incurred within the factory environment.

Adjust Prime Cost and Overheads for Work-in-Progress (WIP) to obtain Cost of Production

Cost of Production = Prime Cost (₦325,000) + Factory Overheads (₦65,000) + Opening WIP (₦18,000) - Closing WIP (₦23,000) = ₦385,000

Opening WIP is added because it represents partially finished goods completed in the current period, while closing WIP is deducted because it remains incomplete at year end.

Key Concept

Preparation of Manufacturing Account and Cost of Production

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