The following details were extracted from the financial records of Koko Manufacturing Ente… — JAMB UTME

The following details were extracted from the financial records of Koko Manufacturing Enterprise for the year ended 31 December 2025:

- Opening stock of raw materials: $\text{₦}38,000$
- Purchases of raw materials: $\text{₦}215,000$
- Carriage inwards on raw materials: $\text{₦}12,000$
- Closing stock of raw materials: $\text{₦}45,000$
- Direct factory labor wages: $\text{₦}125,000$
- Factory indirect overhead expenses: $\text{₦}80,000$
- Opening Work-in-Progress (WIP): $\text{₦}34,000$
- Total Cost of Production transferred to Trading Account: $\text{₦}438,000$

What is the value of the closing Work-in-Progress (WIP) at the end of the financial year?

Answer: 21000 ₦

Answer

The valuation of Closing Work-in-Progress (WIP) is ₦21,000.

To find the Closing Work-in-Progress (WIP), we first calculate the cost of raw materials consumed (

\text{Opening Raw Materials} + \text{Purchases} + \text{Carriage Inwards} - \text{Closing Raw Materials} = \text{₦}38,000 + \text{₦}215,000 + \text{₦}12,000 - \text{₦}45,000 = \text{₦}220,000

). Adding direct labor wages of

\text{₦}125,000

yields a Prime Cost of

\text{₦}345,000

. Including factory indirect overhead expenses of

\text{₦}80,000

gives total factory costs of

\text{₦}425,000

. Since

\text{Cost of Production} = \text{Total Factory Cost} + \text{Opening WIP} - \text{Closing WIP}

, substituting the values gives

\text{₦}438,000 = \text{₦}425,000 + \text{₦}34,000 - \text{Closing WIP}

, resulting in a closing WIP valuation of

\text{₦}21,000

Step-by-Step Solution

Calculate the Cost of Raw Materials Consumed

₦220,000

Raw materials consumed equals opening raw material inventory plus purchases and carriage inwards minus closing raw material inventory:

\text{₦}38,000 + \text{₦}215,000 + \text{₦}12,000 - \text{₦}45,000 = \text{₦}220,000

Determine the Prime Cost

₦345,000

Prime cost is the sum of raw materials consumed and direct factory labor wages:

\text{₦}220,000 + \text{₦}125,000 = \text{₦}345,000

Compute Total Factory Manufacturing Cost prior to Work-in-Progress adjustments

₦425,000

Adding factory indirect overhead expenses to the prime cost gives:

\text{₦}345,000 + \text{₦}80,000 = \text{₦}425,000

Reconcile Work-in-Progress (WIP) to determine Closing WIP

₦21,000

Using the accounting relationship

\text{Cost of Production} = \text{Total Factory Cost} + \text{Opening WIP} - \text{Closing WIP}

, we get

\text{₦}438,000 = \text{₦}425,000 + \text{₦}34,000 - \text{Closing WIP}

, which solves to

\text{Closing WIP} = \text{₦}459,000 - \text{₦}438,000 = \text{₦}21,000

Key Concept

Valuation and Adjustment for Work-in-Progress (WIP)

Estimated Time:2m 30s

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