The following details were extracted from the accounting records of Binta Manufacturing Ltd. for the year ended 31 December 2025:
| Item | Amount (₦) |
|---|---|
| Stock of raw materials (1 January 2025) | 45,000 |
| Stock of raw materials (31 December 2025) | 38,000 |
| Purchases of raw materials | 180,000 |
| Carriage inwards on raw materials | 12,000 |
| Return outwards of raw materials | 7,000 |
| Direct factory labor paid | 95,000 |
| Direct factory labor accrued at year-end | 5,000 |
| Royalties paid on production | 15,000 |
| Factory power and lighting | 34,000 |
| Depreciation of factory machinery | 22,000 |
| Work-in-progress (1 January 2025) | 28,000 |
| Work-in-progress (31 December 2025) | 31,000 |
What is the total Cost of Production for the year?
Answer: 360000 ₦
Answer
The total Cost of Production for the year is ₦360,000.
The Cost of Production is correctly determined by summing Prime Cost (₦307,000) and Factory Overheads (₦56,000), giving a gross production cost of ₦363,000, and adjusting for work-in-progress by adding opening WIP (₦28,000) and deducting closing WIP (₦31,000) to arrive at ₦360,000.
Step-by-Step Solution
Key Concept
Manufacturing Account Preparation and Calculation of Cost of Production