The following extract was taken from the books of Koko Furniture Manufacturing Enterprise for the year ended 31st December 2025:
| Item | Amount (₦) |
|---|---|
| Factory rent paid | 180,000 |
| Direct wages paid | 250,000 |
| Factory supervisor salary paid | 120,000 |
| Factory power and lighting | 45,000 |
| Depreciation of factory plant | 30,000 |
Additional information:
1. Prepaid factory rent at the end of the year amounted to ₦30,000.
2. Factory supervisor salary accrued at the year end was ₦15,000.
What is the total amount of factory overheads to be charged in the manufacturing account?
- ₦360,000Answer
- B₦610,000
- C₦390,000
- D₦375,000
Answer
₦360,000
The total factory overheads calculation properly includes only indirect manufacturing costs adjusted for accruals and prepayments: adjusted factory rent (₦180,000 paid minus ₦30,000 prepaid = ₦150,000), adjusted factory supervisor salary (₦120,000 paid plus ₦15,000 accrued = ₦135,000), factory power and lighting (₦45,000), and depreciation of factory plant (₦30,000). Direct wages of ₦250,000 are a prime cost element and are correctly excluded. Summing these items yields ₦360,000.
Step-by-Step Solution
Key Concept
Factory Overheads and Indirect Manufacturing Costs