The financial records of Ogunlade Manufacturing Enterprise show the following details for … — JAMB UTME

The financial records of Ogunlade Manufacturing Enterprise show the following details for the year ended 31 December 2025:

- Prime Cost: $\text{₦}145,000$
- Factory Overheads: $\text{₦}52,000$
- Work-in-Progress (1 January 2025): $\text{₦}18,500$
- Work-in-Progress (31 December 2025): $\text{₦}14,200$

What is the total cost of production to be transferred to the Trading Account?

$\text{₦}201,300$ Answer
B
$\text{₦}192,700$
C
$\text{₦}197,000$
D
$\text{₦}229,700$

Answer

The total cost of production transferred to the Trading Account is

\text{₦}201,300

The total cost of production is determined by summing Prime Cost and Factory Overheads, adding Opening Work-in-Progress, and deducting Closing Work-in-Progress.

\text{₦}145,000 + \text{₦}52,000 + \text{₦}18,500 - \text{₦}14,200 = \text{₦}201,300

Step-by-Step Solution

Calculate total manufacturing costs incurred during the year

\text{Prime Cost} + \text{Factory Overheads} = \text{₦}145,000 + \text{₦}52,000 = \text{₦}197,000

Total cost incurred on production includes direct costs plus factory indirect expenses before adjusting for unfinished goods.

Adjust for Opening Work-in-Progress

\text{₦}197,000 + \text{₦}18,500 = \text{₦}215,500

Opening WIP represents partially completed goods from the previous period completed during the current period, so it is added.

Deduct Closing Work-in-Progress

\text{₦}215,500 - \text{₦}14,200 = \text{₦}201,300

Closing WIP represents goods remaining uncompleted at year-end, which must be deducted to find the cost of fully finished goods.

Key Concept

Cost of Production Calculation with WIP Adjustments

Estimated Time:1m 30s

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