Danladi Woodworks Enterprise extracted the following financial details from its records for the year ended 31st December 2025:
| Cost Item | Amount (₦) | Additional Details |
|---|---|---|
| Factory supervisor's salary | 180,000 | Fully paid |
| Factory power and fuel | 95,000 | Includes ₦15,000 prepaid for the next period |
| Depreciation of factory machinery | 65,000 | Charged for the year |
| Factory rates and insurance | 40,000 | Excludes ₦10,000 accrued and unpaid at year-end |
| Direct wages to machine operators | 300,000 | Paid during the year |
| Office administrative salaries | 120,000 | Paid during the year |
What is the total factory overhead cost to be charged to the Manufacturing Account for the year?
- ₦375,000Answer
- B₦675,000
- C₦385,000
- D₦495,000
Answer
The total factory overhead cost to be charged to the Manufacturing Account is ₦375,000.
Factory overheads include all indirect costs relating to manufacturing activities. In this scenario, the supervisor's salary (₦180,000), adjusted power and fuel (₦95,000 less ₦15,000 prepaid = ₦80,000), factory machinery depreciation (₦65,000), and adjusted factory rates and insurance (₦40,000 plus ₦10,000 accrued = ₦50,000) are summed to give ₦375,000. Direct wages belong in prime cost, and office salaries belong in the profit and loss account.
Step-by-Step Solution
Key Concept
Factory overheads consist of all indirect production costs incurred inside the factory, adjusted for accruals and prepayments, excluding direct costs (prime cost) and administrative/selling expenses.
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