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Difficulty: EasyValuation and Adjustment for Work-in-Progress (WIP)

During a financial period, Zenith Crafts Manufacturing incurred a total of ₦95,000\text{₦}95,000 in manufacturing costs before work-in-progress adjustments. If the opening work-in-progress was valued at ₦14,000\text{₦}14,000 and the closing work-in-progress was valued at ₦9,000\text{₦}9,000, what is the total cost of production in Naira (₦\text{₦})?

Answer: 100000 ��

Answer

The total cost of production is ₦100,000.
The cost of production is calculated by taking total manufacturing costs incurred, adding the opening work-in-progress (work started in the prior period and finished in the current period), and subtracting closing work-in-progress (work started but not yet finished by period end). Performing ₦95,000 + ₦14,000 - ₦9,000 yields ₦100,000.

Step-by-Step Solution

1
Add opening work-in-progress to the total manufacturing costs before adjustments.
₦95,000 + ₦14,000 = ₦109,000
Opening work-in-progress represents uncompleted goods from the previous period that are finished in the current period, so their valuation must be added.
2
Deduct closing work-in-progress from the sum.
₦109,000 - ₦9,000 = ₦100,000
Closing work-in-progress represents goods still undergoing production at year-end, which must be excluded from completed production costs.

Key Concept

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

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