Manufacturing Accounts

78 questions

All types78 Multiple choice35 Numeric30 Matching10 Fill in the blank3

Apex Garments Ltd. extracted the following expense records for the financial year ended 31st December 2025:

- Factory rent paid: ₦450,000 (including ₦50,000 prepaid for 2026)
- Indirect factory wages: ₦280,000
- Factory supervisor salary paid: ₦150,000 (with ₦30,000 accrued and unpaid)
- Lubricants for manufacturing machinery: ₦60,000
- Direct factory wages: ₦800,000
- Office administrative rent: ₦120,000

What is the total factory overhead for the year?

₦920,000

₦960,000

₦1,040,000

₦1,720,000

Show answer & explanation

Answer: ₦920,000

Answer

₦920,000

Factory overheads encompass all indirect manufacturing expenses incurred inside the factory. Factory rent is adjusted for prepayment (₦450,000 - ₦50,000 = ₦400,000) and supervisor salary is adjusted for accrual (₦150,000 + ₦30,000 = ₦180,000). Adding indirect wages (₦280,000) and lubricants (₦60,000) gives total factory overheads of ₦920,000. Direct wages belong to prime cost, and office administrative rent is an administrative expense.

Step-by-Step Solution

Adjust factory rent for prepayment

₦450,000 - ₦50,000 = ₦400,000

Prepaid rent relates to the next period and must be deducted from cash paid.

Adjust factory supervisor salary for accrual

₦150,000 + ₦30,000 = ₦180,000

Accrued expenses incurred during the current period must be added to cash paid.

Sum all indirect manufacturing expenses (factory overheads)

₦400,000 (Factory Rent) + ₦280,000 (Indirect Wages) + ₦180,000 (Supervisor Salary) + ₦60,000 (Lubricants) = ₦920,000

Factory overheads consist of all indirect costs incurred in the manufacturing area. Direct wages belong to prime cost, and office administrative rent belongs to administrative expenses.

Key Concept

Calculation and adjustment of indirect manufacturing costs and factory overheads

Question 22Question →

Kano Footwear Manufacturers compiled the following financial data for the month of March 2026:

Cost Element	Amount (₦)
Opening inventory of raw leather	90,000
Purchases of raw leather	620,000
Carriage inwards on raw leather	35,000
Closing inventory of raw leather	60,000
Direct factory labor wages	410,000
Royalties paid per shoe produced	55,000
Factory supervisor salary	120,000
Depreciation of production machinery	80,000

What is the Prime Cost for Kano Footwear Manufacturers for March 2026?

₦1,115,000

₦1,150,000

₦1,270,000

₦1,350,000

Show answer & explanation

Answer: ₦1,150,000

Answer

The Prime Cost for March 2026 is ₦1,150,000.

Prime cost consists of all direct costs incurred in manufacturing, which are Direct Materials Consumed, Direct Labor, and Direct Expenses. Calculating Raw Materials Consumed: Opening Stock (₦90,000) + Purchases (₦620,000) + Carriage Inwards (₦35,000) - Closing Stock (₦60,000) = ₦685,000. Adding Direct Labor (₦410,000) and Royalties as direct expenses (₦55,000) yields ₦1,150,000. Factory supervisor salary and machinery depreciation are indirect factory overheads and are excluded.

Step-by-Step Solution

Calculate Cost of Raw Materials Consumed

₦90,000 + ₦620,000 + ₦35,000 - ₦60,000 = ₦685,000

Opening inventory of raw materials plus purchases and carriage inwards minus closing inventory gives the net cost of raw materials used in production.

Identify Direct Labor and Direct Expenses

Direct Labor = ₦410,000; Direct Expenses (Royalties) = ₦55,000

Direct labor and royalties directly relate to the production units and form part of direct cost components.

Calculate Prime Cost

₦685,000 + ₦410,000 + ₦55,000 = ₦1,150,000

Prime Cost is the total sum of Direct Materials Consumed, Direct Labor, and Direct Expenses.

Key Concept

Calculation of Prime Cost and Classification of Direct Costs

Question 23Question →

The following operational financial records were extracted from the books of Kano Garment Manufacturing Enterprise for the accounting year ended 31 December 2025:

Cost Item	Amount (₦)
Inventory of raw materials (1 Jan 2025)	45,000
Purchases of raw materials	185,000
Carriage inwards on raw materials	12,000
Returns outwards of raw materials	8,000
Direct factory labour wages	115,000
Royalties paid on garment production	25,000
Factory supervisor's salary	40,000
Depreciation of factory machinery	18,000
Factory general insurance	22,000
Carriage outwards on finished garments	15,000
Inventory of raw materials (31 Dec 2025)	34,000

What is the Prime Cost for Kano Garment Manufacturing Enterprise for the year ended 31 December 2025?

₦332,000

₦340,000

₦355,000

₦420,000

Show answer & explanation

Answer: ₦340,000

Answer

The Prime Cost of Kano Garment Manufacturing Enterprise for the year ended 31 December 2025 is ₦340,000.

Prime cost represents the total sum of all direct costs associated with production. It is calculated as: Prime Cost = Cost of Raw Materials Consumed + Direct Labour + Direct Expenses. Here, Cost of Raw Materials Consumed = Opening Stock (₦45,000) + Purchases (₦185,000) + Carriage Inwards (₦12,000) - Returns Outwards (₦8,000) - Closing Stock (₦34,000) = ₦200,000. Adding Direct Factory Labour (₦115,000) and Direct Royalties (₦25,000) gives a Prime Cost of ₦340,000.

Step-by-Step Solution

Calculate Cost of Raw Materials Consumed

₦200,000

Formula: Opening Inventory of Raw Materials (₦45,000) + Purchases (₦185,000) + Carriage Inwards (₦12,000) - Returns Outwards (₦8,000) - Closing Inventory of Raw Materials (₦34,000) = ₦200,000.

Identify Direct Labour and Direct Expenses

Direct Labour = ₦115,000; Direct Expenses (Royalties) = ₦25,000

Direct labour wages and production royalties are directly traceable to individual units of production.

Compute Total Prime Cost

₦340,000

Prime Cost = Raw Materials Consumed (₦200,000) + Direct Labour Wages (₦115,000) + Royalties (₦25,000) = ₦340,000.

Key Concept

Calculation of Prime Cost in a Manufacturing Account

Estimated Time:2m 0s

Question 24Question →

The following cost details were extracted from the financial records of Kaduna Industrial Fabrics Ltd for the accounting year ended 31 December 2025:

Cost Item	Amount (₦)
Opening inventory of raw materials	85,000
Purchases of raw materials	420,000
Carriage inwards on raw materials	18,000
Returns of raw materials to suppliers	15,000
Closing inventory of raw materials	92,000
Direct factory wages	310,000
Royalty paid on production design	45,000
Factory supervisor's salary	60,000
Factory building rent	70,000
Depreciation of factory machinery	25,000

What is the Prime Cost of production for the year?

Show answer & explanation

Answer: 771000

Answer

The Prime Cost of production for the year is ₦771,000.

Prime Cost consists strictly of direct material costs, direct labour costs, and direct expenses. The raw materials consumed calculate as ₦85,000 + ₦420,000 + ₦18,000 - ₦15,000 - ₦92,000 = ₦416,000. Adding direct wages of ₦310,000 and direct royalty expenses of ₦45,000 gives ₦771,000. Factory overheads such as supervisor's salary, factory rent, and plant depreciation are indirect costs and must be excluded.

Step-by-Step Solution

Calculate the total cost of raw materials consumed

₦416,000

Raw materials consumed equals Opening Inventory of Raw Materials (₦85,000) + Purchases (₦420,000) + Carriage Inwards (₦18,000) - Returns Outward (₦15,000) - Closing Inventory (₦92,000).

Identify direct wages and direct expenses

Direct wages = ₦310,000; Direct expenses (Royalty) = ₦45,000

Direct factory wages represent direct labour costs, while royalties paid specifically for production designs are direct manufacturing expenses.

Sum all direct cost elements to determine Prime Cost

₦771,000

Prime Cost is the sum of Direct Raw Materials Consumed (₦416,000) + Direct Labour (₦310,000) + Direct Expenses (₦45,000).

Key Concept

Calculation of Prime Cost from Direct Costs

Question 25Question →

Lekki Craftwork Industries extracted the following financial data from its operational books for the accounting year ended 31 December 2025:

Account Details	Amount (₦)
Opening inventory of raw materials	45,000
Purchases of raw materials	180,000
Returns outward of raw materials	15,000
Carriage inwards on raw materials	12,000
Closing inventory of raw materials	32,000
Direct wages paid	110,000
Direct wages accrued at year-end	10,000
Hire of special production equipment	25,000
Royalties paid on technical designs	18,000
Carriage outwards	8,000
Factory supervisor's salary	35,000
Depreciation of factory machinery	20,000

What is the prime cost for the year?

₦408,000

₦351,000

₦353,000

₦388,000

Show answer & explanation

Answer: ₦353,000

Answer

The prime cost for the year is ₦353,000.

Prime cost is determined by combining all direct manufacturing costs:
1. Raw Materials Consumed:

₦45,000 + ₦180,000 - ₦15,000 + ₦12,000 - ₦32,000 = ₦190,000

2. Direct Labour:

₦110,000 + ₦10,000 = ₦120,000

3. Direct Expenses:

₦25,000 + ₦18,000 = ₦43,000

\text{Prime Cost} = ₦190,000 + ₦120,000 + ₦43,000 = ₦353,000

Factory supervisor salary and depreciation are factory overheads, while carriage outwards is an operational selling expense.

Step-by-Step Solution

Calculate the cost of raw materials consumed

₦190,000

Cost of Raw Materials Consumed = Opening Inventory (₦45,000) + Purchases (₦180,000) - Returns Outward (₦15,000) + Carriage Inwards (₦12,000) - Closing Inventory (₦32,000) = ₦190,000.

Adjust direct wages for year-end accruals

₦120,000

Total Direct Labour = Direct Wages Paid (₦110,000) + Accrued Direct Wages (₦10,000) = ₦120,000.

Sum all direct production expenses

₦43,000

Direct Expenses = Hire of Special Equipment (₦25,000) + Royalties Paid (₦18,000) = ₦43,000.

Compute Prime Cost by summing direct materials, direct labour, and direct expenses

₦353,000

Prime Cost = Raw Materials Consumed (₦190,000) + Direct Labour (₦120,000) + Direct Expenses (₦43,000) = ₦353,000.

Key Concept

Prime cost is the sum of all direct costs of production: direct materials consumed, direct labor, and direct expenses. Indirect costs (factory overheads) and distribution expenses (carriage outwards) are strictly excluded.

Question 26Question →

A commercial publishing firm producing custom-designed academic textbooks incurred the following expenditures during a financial period:

I. Copyright royalties paid per copy to book authors
II. Cost of paper and printing ink used in production
III. Rental fees for specialized binding machinery hired exclusively for a specific job
IV. Salary of the factory maintenance engineer

Which combination of items strictly represents direct expenses in the calculation of Prime Cost?

Copyright royalties paid per copy to book authors, cost of paper and printing ink, and rental fees for specialized binding machinery

Rental fees for specialized binding machinery hired exclusively for a specific job and salary of the factory maintenance engineer

Copyright royalties paid per copy to book authors and rental fees for specialized binding machinery hired exclusively for a specific job

Cost of paper and printing ink used in production and salary of the factory maintenance engineer

Show answer & explanation

Answer: Copyright royalties paid per copy to book authors and rental fees for specialized binding machinery hired exclusively for a specific job

Answer

Copyright royalties paid per copy to book authors and rental fees for specialized binding machinery hired exclusively for a specific job.

Direct expenses are costs specifically incurred for a particular job or product line, apart from direct materials and direct labour. Copyright royalties paid per copy to authors and rental fees for specialized machinery hired exclusively for a specific contract are directly traceable to specific production runs and are therefore classified as direct expenses.

Step-by-Step Solution

Define Prime Cost and its components

Prime Cost consists of Direct Materials + Direct Labour + Direct Expenses.

Understanding the components of Prime Cost is essential for proper cost classification in manufacturing accounts.

Identify the definition of Direct Expenses

Direct expenses are expenditures incurred directly and exclusively for a specific product, job, or batch, other than raw materials and direct labour.

This isolates direct expenses from direct materials, direct labour, and indirect factory overheads.

Classify each given cost item

Item I (Author Royalties) = Direct Expense; Item II (Paper and Ink) = Direct Material; Item III (Special Machinery Hire for a Specific Job) = Direct Expense; Item IV (Factory Maintenance Engineer Salary) = Factory Overhead (Indirect Labour).

Evaluating each item against cost classification definitions allows accurate categorization.

Select the combination consisting strictly of Direct Expenses

Items I and III constitute direct expenses.

Only author royalties and job-specific machinery rental represent direct expenses.

Key Concept

Classification of Direct Expenses within Manufacturing Accounts

Question 27Question →

In the operations of a commercial bakery, raw flour and sugar are directly converted into finished loaves of bread. Which of the following expenditure items constitutes a direct cost that forms part of prime cost?

Cost of raw flour and baking ingredients consumed

Salary paid to the factory supervisor

Electricity charges for factory lighting

Depreciation of flour delivery vans

Show answer & explanation

Answer: Cost of raw flour and baking ingredients consumed

Answer

Cost of raw flour and baking ingredients consumed

Prime cost is the sum of direct materials, direct labor, and direct expenses. The cost of raw flour and baking ingredients represents direct raw materials directly traceable to the manufactured loaves of bread.

Step-by-Step Solution

Identify the total direct costs involved in the production process.

Prime cost consists of Direct Materials + Direct Labor + Direct Expenses.

Prime cost represents all expenses directly traceable to the physical creation of the finished unit.

Classify raw flour and baking ingredients.

Raw flour forms the basic direct material input of bread.

It forms a direct part of the manufactured product and is therefore classified under direct material cost.

Key Concept

Prime Cost and Direct Cost Classification in Manufacturing Accounts

Question 28Question →

In manufacturing accounting, specific terminologies are used to classify costs and measure production outcomes. Match each manufacturing account term on the left with its correct accounting definition or description on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Prime Cost matches with the aggregate total of direct materials, direct labour, and direct expenses. Factory Overheads matches with the sum of all indirect factory production expenses. Work-in-Progress matches with partially completed goods remaining in the factory at period end. Cost of Production matches with the net total cost of completed goods transferred to the Trading Account.

Each manufacturing term is accurately matched with its accounting definition: Prime Cost is the sum of all direct expenses; Factory Overheads represents all indirect production expenses; Work-in-Progress refers to uncompleted inventory at period end; and Cost of Production is the net cost of finished goods transferred to the Trading Account.

Step-by-Step Solution

Identify the primary direct components of production cost.

Prime Cost is the sum of Direct Material + Direct Labour + Direct Expenses.

Direct expenses are costs specifically traced and assigned directly to units produced.

Identify the indirect operational costs within the factory.

Factory Overheads comprise indirect material, indirect labour (e.g., supervisor salary), and indirect expenses (e.g., factory rent, machinery depreciation).

Costs incurred inside the factory that cannot be traced directly to a single unit are treated as factory overheads.

Evaluate uncompleted inventory at the closing date.

Work-in-Progress (WIP) represents goods partially processed but not yet finished.

Adjusting for opening and closing WIP ensures that costs allocated strictly match goods completed in the current period.

Determine the overall balance transferred out of the Manufacturing Account.

Cost of Production = Prime Cost + Factory Overheads + Opening WIP - Closing WIP.

This total reflects the cost to bring finished goods into stock and is transferred to the Trading Account.

Key Concept

Key terminologies and cost classifications in Manufacturing Accounts

Question 29Question →

The following cost items were extracted from the accounting records of Calabar Craftworks for the financial year ended 31 December 2025:

Cost Item	Amount (₦)
Direct materials consumed	$180,000$
Direct wages	$120,000$
Royalties on production	$15,000$
Factory power and lighting	$40,000$

What is the Prime Cost of the firm for the year?

Show answer & explanation

Answer: 315000

Answer

The Prime Cost of Calabar Craftworks for the year is ₦315,000.

Prime Cost consists strictly of direct costs: direct materials consumed (₦180,000), direct wages (₦120,000), and direct expenses such as royalties (₦15,000). Adding these three components together gives ₦315,000. Factory power and lighting is an indirect expense and is therefore excluded.

Step-by-Step Solution

Identify direct manufacturing costs

Direct materials consumed = ₦180,000, Direct wages = ₦120,000, Royalties on production = ₦15,000

Direct costs comprise direct raw materials, direct labour, and direct production expenses.

Exclude indirect costs

Factory power and lighting (₦40,000) is classified as factory overheads

Indirect factory expenses are excluded from the calculation of Prime Cost.

Calculate Prime Cost

Prime Cost = ₦180,000 + ₦120,000 + ₦15,000 = ₦315,000

Prime cost is the aggregate of all direct costs.

Key Concept

Prime Cost is the sum of all direct costs incurred in manufacturing, consisting of direct materials consumed, direct wages/labour, and direct expenses (such as royalties). Indirect factory costs are excluded.

Question 30Question →

A bespoke furniture manufacturing firm in Lagos provided the following extract from its financial records for the year ended 31st December 2025:

Accounting Item	Amount ( $₦$ )
Opening stock of raw timber	60,000
Purchases of raw timber	450,000
Carriage inwards on raw timber	30,000
Direct wages paid to craftsmen	280,000
Royalty on furniture designs	40,000
Salary of factory supervisor	120,000
Factory rent and rates	90,000
Closing stock of raw timber	50,000

Based on the information above, calculate the Prime Cost of production for the year in Naira.

Show answer & explanation

Answer: 810000

Answer

The Prime Cost of production for the year is

₦810,000

The correct answer of

₦810,000

is obtained by adding the Cost of Raw Materials Consumed (

₦490,000

), Direct Labour (

₦280,000

), and Direct Expenses (

₦40,000

). Indirect factory costs such as supervisor salary (

₦120,000

) and factory rent (

₦90,000

) are excluded because Prime Cost consists exclusively of direct costs.

Step-by-Step Solution

Calculate Cost of Raw Materials Consumed

₦490,000

Cost of Raw Materials Consumed is determined by adding carriage inwards to purchases of raw timber and opening stock, then deducting closing stock of raw timber:

₦60,000 + ₦450,000 + ₦30,000 - ₦50,000 = ₦490,000

Identify Direct Labour and Direct Expenses

Direct Labour =

₦280,000

; Direct Expenses =

₦40,000

Direct wages paid to craftsmen directly contribute to product creation (Direct Labour), and royalties paid on production designs represent direct expenses directly traceable to units produced.

Calculate Prime Cost

₦810,000

Prime Cost is the sum total of all direct costs:

\text{Prime Cost} = \text{Direct Materials Consumed} + \text{Direct Labour} + \text{Direct Expenses} = ₦490,000 + ₦280,000 + ₦40,000 = ₦810,000

Key Concept

Components and Computation of Prime Cost in Manufacturing Accounts

Estimated Time:1m 30s

Question 31Question →

The following financial details were extracted from the accounting records of Ibadan Furniture Craft Enterprise for the accounting year ended 31 December 2025:

Accounting Item	Amount (₦)
Inventory of raw materials (1 January 2025)	$120,000$
Inventory of raw materials (31 December 2025)	$95,000$
Purchases of raw materials	$480,000$
Carriage inwards on raw materials	$25,000$
Direct wages paid to factory workers	$310,000$
Royalties paid on production volume	$45,000$
Factory supervisor's salary	$150,000$
Depreciation of factory machinery	$60,000$
Factory power and lighting	$85,000$

What is the Prime Cost of production for the period in Naira (₦)?

Show answer & explanation

Answer: 885000

Answer

The Prime Cost of production for Ibadan Furniture Craft Enterprise for the period ended 31 December 2025 is ₦885,000.

Prime Cost comprises all direct costs involved in production: Direct Raw Materials Consumed + Direct Labor (Wages) + Direct Expenses (Royalties). Calculating raw materials consumed yields ₦120,000 + ₦480,000 + ₦25,000 - ₦95,000 = ₦530,000. Adding direct wages of ₦310,000 and direct expenses (royalties) of ₦45,000 gives ₦885,000. Indirect expenses like supervisor salary, factory power, and machinery depreciation are excluded as they represent factory overheads.

Step-by-Step Solution

Calculate the Cost of Raw Materials Consumed

₦530,000

Cost of Raw Materials Consumed = Opening Stock of Raw Materials (₦120,000) + Purchases of Raw Materials (₦480,000) + Carriage Inwards on Raw Materials (₦25,000) - Closing Stock of Raw Materials (₦95,000).

Sum all direct cost components to calculate Prime Cost

₦885,000

Prime Cost is the sum of Cost of Raw Materials Consumed (₦530,000), Direct Wages (₦310,000), and Direct Expenses such as Royalties (₦45,000).

Key Concept

Prime Cost consists strictly of direct material costs consumed, direct wages/labor, and direct production expenses.

Question 32Question →

A manufacturing firm incurs several production-related expenditures during an accounting period. Pair each factory indirect cost listed on the left with its correct sub-classification under factory overheads on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Lubricating oil and cleaning rags match Indirect Materials Overhead; Salaries of factory storekeepers and gatekeepers match Indirect Labour Overhead; Factory building rent and electricity charges match Factory Services and Occupancy Overhead; Annual depreciation charge on manufacturing plant matches Fixed Asset Depreciation Overhead.

Factory overheads encompass all indirect manufacturing costs incurred within the production environment. These are classified into indirect materials (consumable supplies like machine lubricant), indirect labour (salaries of support staff like storekeepers), indirect factory expenses (occupancy costs like rent and power), and indirect asset costs (depreciation of production machinery).

Step-by-Step Solution

Classify consumable workshop supplies

Lubricating oil and cleaning rags represent Indirect Materials Overhead.

Indirect materials are consumable items that support the operation of production equipment without physically forming part of the finished goods.

Classify support personnel compensation

Salaries for storekeepers and gatekeepers represent Indirect Labour Overhead.

These workers facilitate factory operations but do not physically transform raw materials into finished units.

Classify factory facility running costs

Factory building rent and electricity represent Factory Services and Occupancy Overhead.

These expenses maintain the physical factory building and provide essential utilities for manufacturing.

Classify manufacturing asset wear and tear

Depreciation on manufacturing plant represents Fixed Asset Depreciation Overhead.

Depreciation of equipment used in production is an indirect manufacturing cost added to factory overheads.

Key Concept

Sub-classification of Factory Overheads

Question 33Question →

Apex Apparel Enterprises incurred the following expenses during the financial year ended 31st December 2025:

Account Details	Amount (₦)
Opening inventory of raw materials	45,000
Purchases of raw materials	230,000
Carriage inwards on raw materials	12,000
Closing inventory of raw materials	38,000
Direct factory labour wages	115,000
Royalty paid on apparel designs	18,000
Factory supervisor's salary	40,000
Factory rent and rates	25,000
Depreciation of factory machinery	15,000

What is the Prime Cost of production for Apex Apparel Enterprises?

Show answer & explanation

Answer: 382000

Answer

The Prime Cost of production for Apex Apparel Enterprises is ₦382,000.

Prime Cost is the sum of all direct costs incurred in production: Direct Materials Consumed (₦45,000 + ₦230,000 + ₦12,000 - ₦38,000 = ₦249,000), Direct Labour (₦115,000), and Direct Expenses (₦18,000 for royalties). Totaling these yields ₦382,000. Factory overheads such as supervisor salary (₦40,000), factory rent (₦25,000), and machinery depreciation (₦15,000) are indirect manufacturing costs and are excluded from Prime Cost.

Step-by-Step Solution

Calculate the cost of raw materials consumed during the period.

₦249,000

Cost of Raw Materials Consumed = Opening Inventory (₦45,000) + Purchases (₦230,000) + Carriage Inwards (₦12,000) - Closing Inventory (₦38,000) = ₦249,000.

Identify all direct production costs (Direct Labour and Direct Expenses).

Direct Labour = ₦115,000; Direct Expenses (Royalty) = ₦18,000

Direct costs are expenses directly traceable to the production of goods. Royalties on designs are direct expenses, while factory wages for production workers represent direct labour.

Sum Raw Materials Consumed, Direct Labour, and Direct Expenses to arrive at Prime Cost.

₦382,000

Prime Cost = Raw Materials Consumed (₦249,000) + Direct Labour (₦115,000) + Direct Expenses (₦18,000) = ₦382,000. Indirect factory costs (supervisor salary, factory rent, and machinery depreciation) are overheads and excluded.

Key Concept

Prime Cost consists of the sum of direct materials consumed, direct labour, and direct expenses (such as royalties). Indirect factory overheads must be excluded.

Question 34Question →

The following financial details were extracted from the books of Babs Flour Mills for the year ended 31st December 2025:

Expense Item	Amount (₦)
Direct raw materials consumed	1,500,000
Direct factory wages paid	800,000
Indirect factory labor	420,000
Factory machinery depreciation	250,000
Machine lubricants and factory consumables	90,000
Rent and rates paid	600,000
Factory insurance paid	160,000

Additional information:
1. Rent and rates paid includes ₦100,000 paid in advance for 2026. Rent is apportioned 80% to the factory and 20% to the administrative office.
2. Factory insurance has an outstanding accrued liability of ₦40,000 at the end of the financial year.

What is the total amount of factory overheads to be charged in the Manufacturing Account for the year?

₦1,360,000

₦1,440,000

₦2,160,000

₦1,560,000

Show answer & explanation

Answer: ₦1,360,000

Answer

The total factory overheads to be charged in the Manufacturing Account is ₦1,360,000.

The correct total of ₦1,360,000 is derived by aggregating all indirect costs attributable to production: Indirect labor (₦420,000), Factory portion of rent after deducting prepayment [80% × (₦600,000 - ₦100,000) = ₦400,000], Factory machinery depreciation (₦250,000), Machine lubricants and consumables (₦90,000), and Factory insurance after adding accruals (₦160,000 + ₦40,000 = ₦200,000). Direct raw materials and direct wages belong to Prime Cost and are excluded.

Step-by-Step Solution

Calculate the factory portion of rent and rates after adjusting for prepayments.

Total rent expense for the period = ₦600,000 - ₦100,000 (prepayment) = ₦500,000. Factory share (80%) = 80% × ₦500,000 = ₦400,000.

Prepaid expenses must be deducted to reflect only the current period's cost, and non-factory allocations must be excluded.

Calculate the total factory insurance expense including accruals.

Factory insurance for the period = ₦160,000 + ₦40,000 (accrual) = ₦200,000.

Accrued expenses incurred in the period must be added to the cash paid.

Identify all indirect manufacturing cost items and sum them up.

Indirect factory labor (₦420,000) + Apportioned factory rent (₦400,000) + Factory machinery depreciation (₦250,000) + Machine lubricants and consumables (₦90,000) + Adjusted factory insurance (₦200,000) = ₦1,360,000.

Factory overheads consist strictly of indirect manufacturing costs, excluding direct costs (raw materials and direct wages).

Key Concept

Factory Overheads and Indirect Manufacturing Costs

Estimated Time:2m 0s

Question 35Question →

The following extract was taken from the manufacturing records of Enugu Textile Mills Ltd for the operational year ended 31 December 2025:

Item	Amount (₦)
Opening stock of raw materials	150,000
Closing stock of raw materials	90,000
Purchases of raw materials	420,000
Carriage inwards on raw materials	30,000
Direct factory wages	280,000
Production royalties paid	45,000
Factory supervisor salary	65,000
Factory rent and rates	80,000
Depreciation of factory plant	40,000

What is the prime cost of production for Enugu Textile Mills Ltd for the year?

₦805,000

₦835,000

₦900,000

₦1,020,000

Show answer & explanation

Answer: ₦835,000

Answer

The prime cost of production is ₦835,000.

Prime cost is the total of all direct production costs. First, calculate the cost of raw materials consumed: Opening Stock (₦150,000) + Purchases (₦420,000) + Carriage Inwards (₦30,000) - Closing Stock (₦90,000) = ₦510,000. Next, add all other direct costs, which are Direct Factory Wages (₦280,000) and Production Royalties (₦45,000). ₦510,000 + ₦280,000 + ₦45,000 gives ₦835,000. Indirect costs such as factory supervisor salary, factory rent, and plant depreciation are factory overheads and are excluded from prime cost.

Step-by-Step Solution

Calculate the Cost of Raw Materials Consumed

Raw Materials Consumed = Opening Stock + Purchases + Carriage Inwards - Closing Stock = ₦150,000 + ��420,000 + ₦30,000 - ₦90,000 = ₦510,000

Carriage inwards is a direct expenses added to purchases, while closing stock must be deducted to find the cost of materials actually used in production.

Identify other direct cost components

Direct Factory Wages = ₦280,000; Production Royalties = ��45,000

Royalties tied directly to production units and direct factory labor are direct costs, whereas supervisor salary, factory rent, and plant depreciation are indirect factory overheads.

Compute Prime Cost

Prime Cost = Raw Materials Consumed + Direct Wages + Direct Expenses = ₦510,000 + ₦280,000 + ₦45,000 = ₦835,000

Prime cost is defined as the aggregate total of all direct production costs.

Key Concept

Prime cost comprises all direct costs of production: direct raw materials consumed, direct wages/labor, and direct expenses (such as royalties or carriage inwards on raw materials). Factory overheads are excluded.

Question 36Question →

Bello Textile Mills extracted the following expenditure details from its books for the financial year ended 31st December 2025:

- Factory supervisor's salary: $\text{₦}180,000$
- Depreciation of factory plant and machinery: $\text{₦}75,000$
- Direct wages paid to weavers: $\text{₦}350,000$
- Factory power and fuel: $\text{₦}45,000$
- Direct raw materials consumed: $\text{₦}500,000$

What is the total factory overhead cost for Bello Textile Mills for the year?

Show answer & explanation

Answer: 300000

Answer

The total factory overhead cost for the year is

\text{₦}300,000

The correct answer is

\text{₦}300,000

. Factory overheads represent indirect manufacturing expenses. Adding the indirect items: Factory supervisor's salary (

\text{₦}180,000

), Depreciation of factory plant and machinery (

\text{₦}75,000

), and Factory power and fuel (

\text{₦}45,000

) yields

\text{₦}300,000

. Direct materials and direct wages are prime costs and are excluded.

Step-by-Step Solution

Classify expenses into direct costs (prime cost) and indirect factory costs (factory overheads).

Factory supervisor's salary (

\text{₦}180,000

), Depreciation of factory machinery (

\text{₦}75,000

), and Factory power and fuel (

\text{₦}45,000

) are indirect costs. Direct wages (

\text{₦}350,000

) and Direct raw materials (

\text{₦}500,000

) are prime cost components.

Factory overheads consist strictly of indirect expenses incurred within the manufacturing factory environment.

Calculate the total factory overhead cost.

Total Factory Overheads =

\text{₦}180,000 + \text{₦}75,000 + \text{₦}45,000 = \text{₦}300,000

Adding all indirect production cost items gives the total indirect manufacturing expenditure.

Key Concept

Factory overheads comprise all indirect costs incurred in the production processes, excluding direct materials, direct labor, and direct expenses.

Question 37Question →

In manufacturing accounting, cost items and inventory adjustments must be categorized accurately to determine the total cost of finished goods. Match each manufacturing cost transaction or inventory item on the left with its corresponding accounting classification and functional purpose on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Patent royalty per unit matches with direct expense forming Prime Cost; Depreciation of factory plant matches with indirect manufacturing expense under Factory Overheads; Unfinished units at period end match with closing Work-in-Progress deducted from manufacturing costs; Sum of Prime Cost and Factory Overheads adjusted for Work-in-Progress matches with Cost of Production transferred to the Trading Account.

Each terminology in manufacturing accounting has a distinct classification based on traceability and function. Patent royalties tied directly to volume are direct expenses contributing to Prime Cost. Factory plant depreciation is an indirect operational cost categorized as Factory Overheads. Closing Work-in-Progress represents incomplete inventory and is deducted from total manufacturing expenses. The resulting grand total represents the Cost of Production, which is credited to the Manufacturing Account and debited to the Trading Account.

Step-by-Step Solution

Identify direct cost items traceable directly to production units.

Patent royalty paid per unit is classified as a direct expense and forms part of Prime Cost.

Direct expenses are costs other than raw materials and direct labor that are directly attributable to producing specific units.

Identify indirect factory costs incurred within the production facility.

Depreciation of factory machinery is classified under Factory Overheads.

Factory overheads encompass all indirect costs of manufacturing that support production without being directly tied to a specific unit.

Analyze the accounting treatment for partially completed inventory.

Unfinished units at period end represent closing Work-in-Progress and are subtracted from cumulative production costs.

Deducting closing Work-in-Progress ensures that costs incurred on incomplete goods are excluded from the period's cost of completed goods.

Determine the final output metric of the Manufacturing Account.

Prime Cost + Factory Overheads + Net Work-in-Progress adjustment equals the Cost of Production transferred to the Trading Account.

The primary objective of the Manufacturing Account is to determine the Cost of Production for transfer to the Trading Account to ascertain trading gross profit.

Key Concept

Classification of manufacturing costs (Direct Expenses, Factory Overheads, Work-in-Progress, and Cost of Production)

Estimated Time:2m 0s

Question 38Question →

Zentex Shoe Manufacturing Enterprise extracted the following cost records for the financial year ended 31st December 2025:

- Factory supervisor's salary: ₦180,000
- Depreciation of factory machinery: ₦95,000
- Factory electricity paid: ₦120,000 (including ₦15,000 paid in advance for the next period)
- Indirect factory materials consumed: ₦45,000
- Direct wages paid to assembly workers: ₦300,000

What is the total factory overhead for the year?

₦425,000

₦455,000

₦440,000

₦725,000

Show answer & explanation

Answer: ₦425,000

Answer

The total factory overhead for the year is ₦425,000.

The correct calculation isolates all indirect manufacturing expenses—supervisor salary (₦180,000), machine depreciation (₦95,000), indirect materials (₦45,000), and electricity adjusted for prepayment (₦120,000 - ₦15,000 = ₦105,000)—and sums them to ₦425,000. Direct wages are excluded as they are part of prime cost.

Step-by-Step Solution

Calculate the net factory electricity expense for the current financial year by adjusting for prepayment.

₦120,000 - ₦15,000 = ₦105,000

Prepayments represent expenses paid for a future period and must be deducted from cash paid under the accrual concept.

Identify all indirect manufacturing expenses (factory overheads) and exclude direct costs.

Factory Supervisor's Salary = ₦180,000; Depreciation of Machinery = ₦95,000; Indirect Materials = ₦45,000; Adjusted Electricity = ₦105,000. (Direct Wages of ₦300,000 excluded).

Factory overheads consist strictly of indirect production expenses. Direct wages belong to prime cost.

Sum up all indirect manufacturing costs to determine total factory overheads.

₦180,000 + ₦95,000 + ₦105,000 + ₦45,000 = ₦425,000

Adding all verified indirect costs yields the complete factory overhead figure.

Key Concept

Computation and Accrual Adjustment of Factory Overheads

Estimated Time:1m 30s

Question 39Question →

In a manufacturing entity, the prime cost for a financial period is $\text{₦}50,000$ and factory overheads total $\text{₦}20,000$ . If the opening work-in-progress is valued at $\text{₦}5,000$ and the closing work-in-progress is $\text{₦}3,000$ , what is the cost of production?

Show answer & explanation

Answer: 72000

Answer

The cost of production is

\text{₦}72,000

The cost of production is determined by summing prime cost and factory overheads, adding opening work-in-progress, and subtracting closing work-in-progress:

\text{₦}50,000 + \text{₦}20,000 + \text{₦}5,000 - \text{₦}3,000 = \text{₦}72,000

Step-by-Step Solution

Calculate the total factory expenditure prior to work-in-progress adjustments by adding factory overheads to prime cost.

\text{₦}50,000 + \text{₦}20,000 = \text{₦}70,000

Prime cost and factory overheads together represent the current period manufacturing inputs.

Add the valuation of opening work-in-progress.

\text{₦}70,000 + \text{₦}5,000 = \text{₦}75,000

Opening work-in-progress consists of partially completed goods carried over from the prior period that were completed in the current period.

Deduct the valuation of closing work-in-progress.

\text{₦}75,000 - \text{₦}3,000 = \text{₦}72,000

Closing work-in-progress consists of uncompleted goods at the end of the period that must be deferred to the subsequent period.

Key Concept

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

Question 40Question →

The accounting records of Bamidele Manufacturing Ltd for the year ended 31 December 2025 reveal the following financial data:

Cost Item	Amount ( $\text{₦}$ )
Direct raw materials consumed	$180,000$
Direct wages paid (includes $\text{₦}10,000$ paid in advance for 2026)	$90,000$
Factory overheads paid	$120,000$
Opening work-in-progress	$45,000$

Additional Information:
1. Factory power accrued and unpaid at year-end amounted to $\text{₦}15,000$ .
2. The cost of finished goods produced transferred to trading account was $\text{₦}410,000$ .

What is the valuation of closing work-in-progress as at 31 December 2025?

\text{₦}15,000

\text{₦}20,000

\text{₦}30,000

\text{₦}60,000

Show answer & explanation

Answer: $\text{₦}30,000$

Answer

The valuation of closing work-in-progress as at 31 December 2025 is

\text{₦}30,000

The correct answer of

\text{₦}30,000

is obtained by first adjusting direct wages for prepayment (

\text{₦}90,000 - \text{₦}10,000 = \text{₦}80,000

) to get Prime Cost of

\text{₦}260,000

. Adding adjusted factory overheads (

\text{₦}120,000 + \text{₦}15,000 = \text{₦}135,000

) gives total manufacturing costs of

\text{₦}395,000

. Adding opening WIP of

\text{₦}45,000

gives

\text{₦}440,000

. Subtracting the transferred cost of production (

\text{₦}410,000

) yields the closing WIP valuation of

\text{₦}30,000

Step-by-Step Solution

Calculate adjusted direct wages incurred for the period

\text{Direct Wages} = \text{₦}90,000 - \text{₦}10,000\text{ (prepayment)} = \text{₦}80,000

Prepaid expenses must be deducted because they relate to the subsequent accounting period.

Determine Prime Cost

\text{Prime Cost} = \text{Direct Materials} (\text{₦}180,000) + \text{Direct Wages} (\text{₦}80,000) = \text{₦}260,000

Prime Cost consists of all direct manufacturing costs incurred during the period.

Calculate adjusted total factory overheads

\text{Factory Overheads} = \text{₦}120,000 + \text{₦}15,000\text{ (accrual)} = \text{₦}135,000

Accrued expenses must be added as they represent costs incurred in the current period but unpaid.

Compute total manufacturing costs incurred during the period

\text{Total Manufacturing Costs} = \text{Prime Cost} (\text{₦}260,000) + \text{Factory Overheads} (\text{₦}135,000) = \text{₦}395,000

Total current production costs equal direct costs plus indirect factory costs.

Apply the Work-in-Progress formula to solve for Closing Work-in-Progress

\text{Closing WIP} = \text{Total Manufacturing Costs} (\text{₦}395,000) + \text{Opening WIP} (\text{₦}45,000) - \text{Cost of Production} (\text{₦}410,000) = \text{₦}30,000

Rearranging the formula

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

isolates closing work-in-progress.

Key Concept

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

Estimated Time:2m 30s

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