Manufacturing Accounts Practice Questions — JAMB UTME — Page 3

Question 41Question →

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?

Show answer & explanation

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

1

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

.

2

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

.

3

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

.

4

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

Question 42Question →

A commercial ceramics craft firm in Abeokuta extracted the following financial figures for the year ended 31st December 2025:

Account Details	Amount (₦)
Purchases of raw clay and glazes	450,000
Carriage inwards on raw clay	30,000
Wages of potters and kiln operators	320,000
Royalties paid per ceramic unit design	80,000
Salary of factory supervisor	150,000
Factory power and maintenance	200,000

What is the total Prime Cost for the year?

Show answer & explanation

Answer: 880000

Answer

The total Prime Cost for the year is ₦880,000.

Prime Cost represents the aggregate of all direct costs incurred in manufacturing. It includes direct raw materials (purchases of

₦450,000

plus carriage inwards of

₦30,000 = ₦480,000

), direct wages (

₦320,000

), and direct expenses (

₦80,000

for royalties). Summing these direct components yields

₦480,000 + ₦320,000 + ₦80,000 = ₦880,000

. Factory supervisor salaries (

₦150,000

) and factory power/maintenance (

₦200,000

) are indirect expenses (factory overheads) and are excluded from Prime Cost.

Step-by-Step Solution

1

Calculate Direct Materials Consumed

₦480,000

Carriage inwards on raw materials is a direct cost incurred to bring raw clay into the factory and must be added to raw material purchases.

2

Identify Direct Labour and Direct Expenses

Direct Labour = ₦320,000; Direct Expenses = ₦80,000

Wages of potters directly creating products are direct labour, and royalties on designs are direct expenses.

3

Compute Prime Cost

₦880,000

Prime Cost is the sum of all direct production costs: Direct Materials (₦480,000) + Direct Labour (₦320,000) + Direct Expenses (₦80,000).

Key Concept

Calculation of Prime Cost in Manufacturing Accounts

Estimated Time:1m 30s

Question 43Question →

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

Show answer & explanation

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)

Question 44Question →

The following operational details were extracted from the accounts of Zaria Leathercrafts Enterprise for the financial year:

Operational Item	Amount (₦)
Opening inventory of raw materials	50,000
Purchases of raw materials	240,000
Carriage inwards on raw materials	18,000
Closing inventory of raw materials	38,000
Direct factory wages	160,000
Royalties paid on production	30,000
Factory supervisor salary	75,000
Depreciation of factory machinery	40,000

What is the prime cost of production for the period?

Show answer & explanation

Answer: 460000

Answer

The prime cost of production for the period is ₦460,000.

Prime Cost is the sum of all direct manufacturing costs. It is calculated by adding the cost of raw materials consumed (₦50,000 + ₦240,000 + ₦18,000 - ₦38,000 = ₦270,000), direct factory wages (₦160,000), and direct expenses such as royalties (₦30,000), giving a total of ₦460,000. Indirect expenses like factory supervisor salary and depreciation of machinery are factory overheads and are excluded.

Step-by-Step Solution

1

Calculate the cost of raw materials consumed

₦270,000

Raw materials consumed is computed as opening stock of raw materials (₦50,000) plus purchases (₦240,000) plus carriage inwards on raw materials (₦18,000) minus closing stock of raw materials (₦38,000).

2

Identify direct cost components

Direct wages = ₦160,000; Direct expenses (royalties) = ₦30,000

Direct costs are expenses directly traceable to the physical unit produced. Royalties and direct wages are direct costs, while supervisor salaries and machinery depreciation are indirect factory overheads.

3

Sum direct materials, direct wages, and direct expenses

₦460,000

Prime Cost = Raw Materials Consumed + Direct Wages + Direct Expenses = ₦270,000 + ₦160,000 + ₦30,000 = ₦460,000.

Key Concept

Prime Cost Calculation in Manufacturing Accounts

Question 45Question →

Match each manufacturing accounting transaction or component adjustment on the left with its correct financial treatment or resulting calculation on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Direct costs adjustments add

₦40,000

to Prime Cost; factory overheads and Work-in-Progress net to adding

₦110,000

to Prime Cost; market value transfer equals

₦600,000

debited to Trading Account; and provision for unrealized profit equals

₦15,000

.

Each item accurately maps to its double-entry or financial statement presentation rule: direct expenses and direct labor additions increase Prime Cost; factory overheads combined with opening WIP minus closing WIP adjust Prime Cost to arrive at Cost of Production; transfer at market value includes manufacturing profit debited to Trading Account; and unrealized profit on closing inventory is isolated using the margin ratio derived from mark-up.

Step-by-Step Solution

1

Calculate Prime Cost adjustments

Direct carriage (

₦15,000

) and accrued direct labor (

₦25,000

) are direct expenses and direct wages respectively. Adding them gives

₦40,000

added to Prime Cost components.

Direct costs form part of Prime Cost before adding overheads.

2

Calculate net overhead and Work-in-Progress adjustment to Prime Cost

\text{Factory Overheads} + \text{Opening WIP} - \text{Closing WIP} = ₦120,000 + ₦35,000 - ₦45,000 = ₦110,000

.

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

3

Determine market value transfer of completed goods

\text{Market Value} = ₦500,000 + (0.20 \times ₦500,000) = ₦600,000

.

Finished goods transferred at market value are debited to the Trading Account at Cost of Production plus Manufacturing Profit.

4

Calculate provision for unrealized profit on closing inventory

\text{Margin} = \frac{\text{Mark-up}}{100 + \text{Mark-up}} = \frac{25}{125} = 20\%

.

\text{Unrealized profit} = 20\% \times ₦75,000 = ₦15,000

.

Closing inventory at market value must be reduced by the profit element to state it at actual production cost on the Balance Sheet.

Key Concept

Preparation of Manufacturing Account and Cost of Production

Question 46Question →

Apex Manufacturing Enterprise provided the following extract from its financial records for the year ended 31 December 2025:

- Opening stock of raw materials: $\text{₦}45,000$
- Purchases of raw materials: $\text{₦}180,000$
- Carriage inwards on raw materials: $\text{₦}15,000$
- Closing stock of raw materials: $\text{₦}35,000$
- Direct factory wages: $\text{₦}120,000$
- Factory power and fuel: $\text{₦}40,000$
- Depreciation of factory equipment: $\text{₦}25,000$
- Work-in-progress (1 January 2025): $\text{₦}18,000$
- Work-in-progress (31 December 2025): $\text{₦}23,000$

What is the total cost of production for the year?

Show answer & explanation

Answer: 385000

Answer

The total cost of production for the year is ₦385,000.

The correct cost of production is computed by combining raw materials consumed (₦205,000), direct wages (₦120,000), and factory overheads (₦65,000) to arrive at manufacturing costs before WIP adjustments (₦390,000), then adding opening work-in-progress (₦18,000) and deducting closing work-in-progress (₦23,000), yielding exactly ₦385,000.

Step-by-Step Solution

1

Determine the cost of raw materials consumed

Raw Materials Consumed = ₦45,000 + ₦180,000 + ₦15,000 - ₦35,000 = ₦205,000

Carriage inwards is added to raw materials purchases while closing stock of raw materials is subtracted from total materials available for use.

2

Calculate the Prime Cost

Prime Cost = Direct Materials Consumed (₦205,000) + Direct Factory Wages (₦120,000) = ₦325,000

Prime Cost consists of all direct manufacturing costs including direct raw materials and direct labor.

3

Determine Total Factory Overheads

Factory Overheads = Factory Power and Fuel (₦40,000) + Depreciation of Factory Equipment (₦25,000) = ₦65,000

Factory overheads encompass all indirect expenses incurred within the factory environment.

4

Adjust Prime Cost and Overheads for Work-in-Progress (WIP) to obtain Cost of Production

Cost of Production = Prime Cost (₦325,000) + Factory Overheads (₦65,000) + Opening WIP (₦18,000) - Closing WIP (₦23,000) = ₦385,000

Opening WIP is added because it represents partially finished goods completed in the current period, while closing WIP is deducted because it remains incomplete at year end.

Key Concept

Preparation of Manufacturing Account and Cost of Production

Question 47Question →

The financial records of Vanguard Industrial Enterprises for the year ended 31 December 2025 reveal the following details:

Item	Amount ( $\text{₦}$ )
Cost of raw materials consumed	180,000
Direct wages paid	62,000
Factory royalties	25,000
Factory overhead costs	50,000
Work-in-progress (1 January 2025)	48,000
Work-in-progress (31 December 2025)	53,000

*Note:* Direct wages of $\text{₦}8,000$ were accrued and unpaid at the end of the year.

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

Show answer & explanation

Answer: 320000

Answer

The total cost of production transferred to the Trading Account for the year is 320,000.

The cost of production is determined by calculating the total manufacturing cost incurred during the period (Prime Cost of ₦275,000 plus Factory Overheads of ₦50,000 = ₦325,000), adding the opening work-in-progress (₦48,000), and subtracting the closing work-in-progress (₦53,000). Direct wages paid must first be adjusted for accrued wages (₦62,000 + ₦8,000 = ₦70,000). The final cost of production transferred to the Trading Account is ₦320,000.

Step-by-Step Solution

1

Adjust direct wages for accruals at the end of the period

Total Direct Wages = 62000 + 8000 = 70000

Accrued direct expenses must be added to direct wages paid to reflect total direct labor cost incurred during the period.

2

Calculate Prime Cost by summing direct costs

Prime Cost = 180000 + 70000 + 25000 = 275000

Prime Cost consists of raw materials consumed, direct wages, and direct factory expenses.

3

Add factory overheads to Prime Cost to get total manufacturing cost incurred

Total Manufacturing Cost = 275000 + 50000 = 325000

Factory overheads represent indirect costs incurred during production.

4

Apply Work-in-Progress (WIP) adjustments to find Cost of Production

Cost of Production = 325000 + 48000 - 53000 = 320000

Opening WIP is added because it was completed during this financial year, while Closing WIP is deducted because it remains uncompleted at year-end.

Key Concept

Valuation and Adjustment for Work-in-Progress in Manufacturing Accounts

Question 48Question →

The following balances were extracted from the books of Zenith Manufacturing Works for the financial year ended 31 December 2025:

Item	Amount (₦)
Direct raw materials consumed	500,000
Direct factory wages paid	220,000
Accrued direct factory wages at year-end	30,000
Factory overhead expenses	180,000
Carriage outwards	40,000
Work-in-progress (1 January 2025)	80,000
Work-in-progress (31 December 2025)	30,000

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

₦880,000

₦980,000

₦920,000

₦1,020,000

Show answer & explanation

Answer: ₦980,000

Answer

The total cost of production transferred to the Trading Account is ₦980,000.

The cost of production is computed by combining prime cost (direct materials consumed ₦500,000 plus total direct labour of ₦250,000) with factory overheads (₦180,000), giving total manufacturing costs of ₦930,000. Adjusting for work-in-progress by adding opening WIP (₦80,000) and deducting closing WIP (₦30,000) results in ₦980,000.

Step-by-Step Solution

1

Calculate Total Direct Labour Cost

₦220,000 + ₦30,000 = ₦250,000

Accrued direct wages at year-end must be added to direct wages paid to establish the full direct labour expense for the period.

2

Calculate Prime Cost

₦500,000 + ₦250,000 = ₦750,000

Prime Cost is the sum of direct raw materials consumed, direct labour, and direct expenses.

3

Add Factory Overheads

₦750,000 + ₦180,000 = ₦930,000

Factory overheads are indirect production costs added to Prime Cost.

4

Adjust for Opening and Closing Work-in-Progress (WIP)

₦930,000 + ₦80,000 - ₦30,000 = ₦980,000

Opening work-in-progress is added because it represents incomplete work from the previous period completed now, while closing work-in-progress is subtracted as it remains unfinished at year-end.

Key Concept

Calculation of Cost of Production in Manufacturing Accounts

Question 49Question →

The following figures were extracted from the accounting records of Danjuma Manufacturing Company for the year ended 31 December 2025:

Item	Amount ( $\text{₦}$ )
Cost of raw materials consumed	140,000
Direct wages	60,000
Direct expenses	10,000
Factory overheads	45,000
Work-in-progress at 1 January 2025	25,000
Work-in-progress at 31 December 2025	18,000

What is the total cost of production for the year?

\text{₦}248,000

\text{₦}255,000

\text{₦}262,000

\text{₦}298,000

Show answer & explanation

Answer: $\text{₦}262,000$

Answer

The total cost of production for the year is

\text{₦}262,000

.

The correct answer is

\text{₦}262,000

. Prime cost (

\text{₦}140,000 + \text{₦}60,000 + \text{₦}10,000 = \text{₦}210,000

) plus factory overheads (

\text{₦}45,000

) equals

\text{₦}255,000

. Adding opening work-in-progress (

\text{₦}25,000

) and deducting closing work-in-progress (

\text{₦}18,000

) yields

\text{₦}262,000

.

Step-by-Step Solution

1

Calculate Prime Cost

\text{Prime Cost} = \text{Raw Materials Consumed} + \text{Direct Wages} + \text{Direct Expenses} = \text{₦}140,000 + \text{₦}60,000 + \text{₦}10,000 = \text{₦}210,000

.

Prime cost consists of all direct costs incurred in manufacturing.

2

Calculate Total Factory Cost before WIP adjustment

\text{Total Factory Cost} = \text{Prime Cost} + \text{Factory Overheads} = \text{₦}210,000 + \text{₦}45,000 = \text{₦}255,000

.

Factory overheads represent indirect manufacturing expenses.

3

Adjust for Opening and Closing Work-in-Progress

\text{Cost of Production} = \text{Total Factory Cost} + \text{Opening WIP} - \text{Closing WIP} = \text{₦}255,000 + \text{₦}25,000 - \text{₦}18,000 = \text{₦}262,000

.

Opening WIP represents unfinished goods brought forward to be completed this period, while closing WIP represents goods unfinished at year-end that must be deducted.

Key Concept

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

Question 50Question →

A manufacturing business incurs a total production cost of $\text{N}250,000$ during the accounting period. If finished goods are transferred to the trading account at a market value incorporating a $20\%$ mark-up on production cost, what is the amount of manufacturing profit?

\text{N}50,000

\text{N}300,000

\text{N}41,667

\text{N}200,000

Show answer & explanation

Answer: $\text{N}50,000$

Answer

The manufacturing profit is

\text{N}50,000

.

The correct answer correctly calculates manufacturing profit as

20\%

of the cost of production (

\text{N}250,000 \times 0.20 = \text{N}50,000

).

Step-by-Step Solution

1

Identify the total cost of production and the given profit mark-up percentage.

Total Cost of Production =

\text{N}250,000

; Mark-up =

20\%

.

Manufacturing profit is earned by transferring finished goods from the manufacturing account to the trading account at market value above cost.

2

Calculate the manufacturing profit using the mark-up on production cost.

\text{Manufacturing Profit} = 20\% \times \text{N}250,000 = \text{N}50,000

.

Applying the percentage mark-up directly to the cost of production gives the profit generated during the manufacturing process.

Key Concept

Manufacturing profit is the excess of the transfer market value of finished goods over their actual cost of production.

Question 51Question →

Danladi Woodworks Enterprise extracted the following financial details from its records for the year ended 31st December 2025:

Cost Item	Amount (₦)	Additional Details
Factory supervisor's salary	180,000	Fully paid
Factory power and fuel	95,000	Includes ₦15,000 prepaid for the next period
Depreciation of factory machinery	65,000	Charged for the year
Factory rates and insurance	40,000	Excludes ₦10,000 accrued and unpaid at year-end
Direct wages to machine operators	300,000	Paid during the year
Office administrative salaries	120,000	Paid during the year

What is the total factory overhead cost to be charged to the Manufacturing Account for the year?

₦375,000

₦675,000

₦385,000

₦495,000

Show answer & explanation

Answer: ₦375,000

Answer

The total factory overhead cost to be charged to the Manufacturing Account is ₦375,000.

Factory overheads include all indirect costs relating to manufacturing activities. In this scenario, the supervisor's salary (₦180,000), adjusted power and fuel (₦95,000 less ₦15,000 prepaid = ₦80,000), factory machinery depreciation (₦65,000), and adjusted factory rates and insurance (₦40,000 plus ₦10,000 accrued = ₦50,000) are summed to give ₦375,000. Direct wages belong in prime cost, and office salaries belong in the profit and loss account.

Step-by-Step Solution

1

Identify and adjust factory indirect expenses

Factory power and fuel = ₦95,000 - ₦15,000 (prepaid) = ₦80,000; Factory rates and insurance = ₦40,000 + ₦10,000 (accrued) = ₦50,000.

Prepaid expenses must be deducted from paid amounts, whereas accrued expenses must be added to reflect the actual expense incurred for the accounting period.

2

Filter for factory overhead costs only

Factory supervisor's salary (₦180,000), Adjusted factory power (₦80,000), Depreciation of factory machinery (₦65,000), and Adjusted factory rates (₦50,000).

Direct wages (₦300,000) belong to Prime Cost, and Office administrative salaries (₦120,000) are non-factory operating expenses.

3

Calculate total factory overheads

₦180,000 + ₦80,000 + ₦65,000 + ₦50,000 = ₦375,000.

Summing all adjusted indirect manufacturing expenditures yields the total factory overhead.

Key Concept

Factory overheads consist of all indirect production costs incurred inside the factory, adjusted for accruals and prepayments, excluding direct costs (prime cost) and administrative/selling expenses.

Estimated Time:2m 0s

Question 52Question →

Kano Industrial Processing Ltd provides the following figures extracted from its books for the financial year ended 31 December 2025:

- Raw materials inventory (1 January 2025): $₦45,000$
- Purchases of raw materials: $₦220,000$
- Carriage inwards on raw materials: $₦12,000$
- Returns outwards of raw materials: $₦8,000$
- Raw materials inventory (31 December 2025): $₦35,000$
- Direct wages paid: $₦150,000$ (with $₦10,000$ accrued at year-end)
- Direct factory expenses: $₦25,000$
- Factory power and lighting paid: $₦40,000$ (includes $₦4,000$ prepaid for 2026)
- Factory supervisor's salary: $₦65,000$
- Depreciation of factory plant and machinery: $₦30,000$
- Work-in-progress inventory (1 January 2025): $₦28,000$
- Work-in-progress inventory (31 December 2025): $₦34,000$

What is the total Cost of Production transferred to the Trading Account for the year ended 31 December 2025?

Show answer & explanation

Answer: 544000

Answer

The total Cost of Production transferred to the Trading Account is ₦544,000.

The Cost of Production is calculated by aggregating Prime Cost (

₦419,000

) and Total Factory Overheads (

₦131,000

), yielding a gross production cost of

₦550,000

. Adjusting for Work-in-Progress by adding Opening WIP (

₦28,000

) and subtracting Closing WIP (

₦34,000

) results in a final Cost of Production of

₦544,000

.

Step-by-Step Solution

1

Calculate Cost of Raw Materials Consumed

₦234,000

Cost of Raw Materials Consumed is calculated as Opening Stock (

₦45,000

) + Purchases (

₦220,000

) + Carriage Inwards (

₦12,000

) - Returns Outwards (

₦8,000

) - Closing Stock (

₦35,000

).

2

Calculate Direct Costs and Prime Cost

₦419,000

Direct Wages are adjusted for year-end accrual (

₦150,000 + ₦10,000 = ₦160,000

). Prime Cost = Raw Materials Consumed (

₦234,000

) + Direct Wages (

₦160,000

) + Direct Expenses (

₦25,000

).

3

Calculate Factory Overheads

₦131,000

Factory Power is adjusted for prepayment (

₦40,000 - ₦4,000 = ₦36,000

). Total Factory Overheads = Factory Power (

₦36,000

) + Supervisor's Salary (

₦65,000

) + Factory Plant Depreciation (

₦30,000

).

4

Calculate Net Cost of Production including Work-in-Progress adjustments

₦544,000

Cost of Production = Prime Cost (

₦419,000

) + Factory Overheads (

₦131,000

) + Opening WIP (

₦28,000

) - Closing WIP (

₦34,000

) = ₦544,000.

Key Concept

Preparation of Manufacturing Account and Cost of Production

Estimated Time:3m 0s

Question 53Question →

Match each accounting item or term related to the transfer of finished goods at market value with its corresponding accounting treatment or definition.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Transfer Value of Finished Goods matches with being credited to the Manufacturing Account and debited to the Trading Account at market price; Manufacturing Profit matches with being credited to the Profit and Loss Account as profit generated by the manufacturing department; Provision for Unrealized Profit matches with being deducted from closing finished goods inventory in the Statement of Financial Position to restore stock to original cost; Cost of Production matches with being the total prime cost plus factory overheads adjusted for opening and closing work-in-progress.

Each item correctly matches its standard accounting function: Transfer Value of Finished Goods bridges manufacturing and trading at market price; Manufacturing Profit records factory profit in the P&L; Provision for Unrealized Profit reduces unsold inventory back to cost on the balance sheet; and Cost of Production measures total manufacturing expenditure before profit markup.

Step-by-Step Solution

1

Identify the destination of goods transferred at market value.

The market value of completed goods is credited to the Manufacturing Account and debited to the Trading Account.

This transfers the completed goods from the factory to the selling department at market value.

2

Determine how manufacturing profit is treated in financial statements.

Manufacturing profit (Market Value - Cost of Production) is recognized by crediting the Profit and Loss Account.

It represents internal profit earned by manufacturing goods in-house rather than purchasing from external suppliers.

3

Analyze the adjustment needed for closing inventory containing internal profit.

Provision for unrealized profit is deducted from closing inventory on the balance sheet.

According to the prudence concept, unsold stock must not be valued above cost, so internal profit on unsold goods must be eliminated.

4

Define cost of production in manufacturing accounts.

Cost of production is the sum of direct material, direct labor, direct expenses (prime cost), and factory overheads adjusted for work-in-progress.

It represents the total cost incurred to produce goods before applying any market markup.

Key Concept

Accounting treatment of finished goods transferred at market value, manufacturing profit, and unrealized profit provision.

Question 54Question →

The following balances were extracted from the accounting records of Plateau Manufacturing Ltd for the financial year ended 31 December 2025:

Accounting Item	Amount (₦)
Opening inventory of raw materials	45,000
Purchases of raw materials	180,000
Carriage inwards on raw materials	12,000
Closing inventory of raw materials	35,000
Direct wages paid (₦5,000 accrued at year end)	90,000
Direct factory expenses	28,000
Factory supervisor's salary	40,000
Depreciation of factory plant	35,000
Factory power and fuel	22,000
Opening work-in-progress	18,000
Closing work-in-progress	24,000

What is the total Cost of Production for the year?

Show answer & explanation

Answer: 416000

Answer

The Cost of Production for the year is ₦416,000.

The Cost of Production is ₦416,000. It is derived by first calculating Raw Materials Consumed (₦45,000 + ₦180,000 + ₦12,000 - ₦35,000 = ₦202,000). Adding Direct Labor inclusive of accruals (₦90,000 + ₦5,000 = ₦95,000) and Direct Expenses (₦28,000) yields a Prime Cost of ₦325,000. Adding total Factory Overheads (₦40,000 + ₦35,000 + ₦22,000 = ₦97,000) gives total factory costs of ₦422,000. Finally, adjusting for Work-in-Progress (+ ₦18,000 Opening WIP - ₦24,000 Closing WIP) gives ₦416,000.

Step-by-Step Solution

1

Calculate Cost of Raw Materials Consumed

₦202,000

Raw materials consumed equals opening raw materials inventory (��45,000) plus purchases (₦180,000) plus carriage inwards (₦12,000) minus closing raw materials inventory (₦35,000).

2

Calculate Prime Cost

₦325,000

Prime Cost is the sum of raw materials consumed (₦202,000), total direct wages incurred including year-end accruals (₦90,000 paid + ₦5,000 accrued = ₦95,000), and direct expenses (₦28,000).

3

Calculate Total Factory Overheads

₦97,000

Factory Overheads comprise indirect manufacturing expenses: factory supervisor salary (₦40,000), plant depreciation (₦35,000), and factory power and fuel (₦22,000).

4

Adjust for Work-in-Progress to determine Cost of Production

₦416,000

Cost of Production is Prime Cost (₦325,000) plus Factory Overheads (₦97,000) plus Opening Work-in-Progress (₦18,000) minus Closing Work-in-Progress (₦24,000).

Key Concept

Calculation of Manufacturing Account components including Prime Cost, Factory Overheads, and Work-in-Progress adjustments.

Question 55Question →

A manufacturing enterprise provided the following figures for the financial year ended 31 December 2025:

Item	Amount
Direct manufacturing costs	$\text{₦}180,000$
Factory overhead expenses	$\text{₦}65,000$
Work-in-progress (1 January 2025)	$\text{₦}22,000$
Work-in-progress (31 December 2025)	$\text{₦}18,000$

What is the total cost of production transferred to the trading account?

\text{₦}241,000

\text{₦}245,000

\text{₦}249,000

\text{₦}263,000

Show answer & explanation

Answer: $\text{₦}249,000$

Answer

The total cost of production transferred to the trading account is

\text{₦}249,000

.

The cost of production is computed as: Total Manufacturing Costs (Direct Costs + Factory Overheads) + Opening Work-in-Progress - Closing Work-in-Progress. Substituting the given amounts:

\text{₦}180,000 + \text{₦}65,000 + \text{₦}22,000 - \text{₦}18,000 = \text{₦}249,000

.

Step-by-Step Solution

1

Calculate total manufacturing cost incurred before WIP adjustment.

\text{Direct Costs} + \text{Factory Overheads} = \text{₦}180,000 + \text{₦}65,000 = \text{₦}245,000

Prime costs and factory overheads combine to form total incurred cost during the production period.

2

Adjust for Opening Work-in-Progress (WIP).

\text{₦}245,000 + \text{₦}22,000 = \text{₦}267,000

Opening WIP represents goods partially completed in the previous period that were completed during the current period.

3

Deduct Closing Work-in-Progress (WIP).

\text{Cost of Production} = \text{₦}267,000 - \text{₦}18,000 = \text{₦}249,000

Closing WIP represents uncompleted goods at year-end, which must be carried forward to the next period.

Key Concept

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

Estimated Time:1m 30s

Question 56Question →

Match each key manufacturing account component on the left with its corresponding accounting formula or descriptive definition on the right.

Click a left item, then click its matching right item

Show answer & explanation

Answer

Cost of Raw Materials Consumed matches Opening stock of raw materials + Purchases of raw materials + Carriage inwards - Closing stock of raw materials; Prime Cost matches Cost of raw materials consumed + Direct factory labor wages + Direct manufacturing expenses; Factory Overheads matches Indirect production expenses such as factory power, factory supervisor salaries, and plant depreciation; Cost of Production matches Prime cost + Factory overheads + Opening work-in-progress - Closing work-in-progress.

Each manufacturing cost term aligns with its correct standard accounting definition. Cost of Raw Materials Consumed measures materials physically used; Prime Cost aggregates direct expenses; Factory Overheads encompass indirect plant costs; and Cost of Production combines prime cost and overheads adjusted for net work-in-progress.

Step-by-Step Solution

1

Determine the formula for Cost of Raw Materials Consumed

Opening stock of raw materials + Purchases + Carriage inwards - Closing stock of raw materials

This formula tracks the physical movement and cost of raw materials actually used during the manufacturing period.

2

Determine the composition of Prime Cost

Cost of raw materials consumed + Direct wages + Direct expenses

Prime cost aggregated all direct inputs that can be traced directly to the production units.

3

Identify the definition of Factory Overheads

Indirect production expenses such as factory power, supervisor salaries, and plant depreciation

Overheads represent operational costs incurred in the factory area that cannot be directly assigned to specific units of production.

4

Determine the calculation for Cost of Production

Prime cost + Factory overheads + Opening work-in-progress - Closing work-in-progress

Cost of production reflects the total manufacturing cost transferred to finished goods after accounting for partially completed units.

Key Concept

Manufacturing Account Components and Cost Structure Determination

Question 57Question →

Kambai Manufacturing Enterprise provided the following cost data for the year ended 31st December 2025:

Cost Component	Amount ( $\text{N}$ )
Raw materials consumed	180,000
Direct factory wages	90,000
Factory overhead expenses	50,000
Work-in-progress (1st January 2025)	15,000
Work-in-progress (31st December 2025)	25,000

Finished goods are transferred from the manufacturing department to the trading department at market value, calculated using a mark-up of $25\%$ on the cost of production. What is the amount of manufacturing profit to be transferred to the Profit and Loss Account for the year?

\text{N}77,500

\text{N}82,500

\text{N}62,000

\text{N}80,000

Show answer & explanation

Answer: $\text{N}77,500$

Answer

\text{N}77,500

The correct answer of

\text{N}77,500

is determined by calculating the true Cost of Production first:

\text{N}180,000 + \text{N}90,000 + \text{N}50,000 + \text{N}15,000 - \text{N}25,000 = \text{N}310,000

. Applying the

25\%

mark-up on this cost gives

\text{N}310,000 \times 0.25 = \text{N}77,500

, which is credited to the Manufacturing Account as manufacturing profit.

Step-by-Step Solution

1

Calculate Prime Cost

\text{Prime Cost} = \text{Raw Materials Consumed} + \text{Direct Factory Wages} = \text{N}180,000 + \text{N}90,000 = \text{N}270,000

Prime cost consists of all direct manufacturing costs.

2

Calculate Total Factory Cost

\text{Total Factory Cost} = \text{Prime Cost} + \text{Factory Overheads} = \text{N}270,000 + \text{N}50,000 = \text{N}320,000

Factory overheads represent indirect manufacturing expenses added to prime cost.

3

Adjust for Work-in-Progress (WIP) to find Cost of Production

\text{Cost of Production} = \text{Total Factory Cost} + \text{Opening WIP} - \text{Closing WIP} = \text{N}320,000 + \text{N}15,000 - \text{N}25,000 = \text{N}310,000

Opening WIP is added because it was completed during the current period, while closing WIP is deducted as it remains incomplete.

4

Compute Manufacturing Profit

\text{Manufacturing Profit} = 25\% \times \text{Cost of Production} = 0.25 \times \text{N}310,000 = \text{N}77,500

Manufacturing profit is the mark-up percentage applied directly to the cost of production.

Key Concept

Transfer of Finished Goods at Market Value and Manufacturing Profit

Question 58Question →

The following financial information was extracted from the records of Eko Industrial Manufacturing Company for the year ended 31 December 2025:

Financial Account Item	Amount (₦)
Opening Inventory of Raw Materials	50,000
Purchases of Raw Materials	200,000
Carriage Inwards on Raw Materials	10,000
Closing Inventory of Raw Materials	40,000
Direct Factory Wages	150,000
Direct Manufacturing Expenses	30,000
Factory Rent and Utilities	60,000
Depreciation of Factory Machinery	40,000
Opening Work-in-Progress	35,000
Closing Work-in-Progress	15,000

What is the total Cost of Production for the year?

₦520,000

₦480,000

₦420,000

₦500,000

Show answer & explanation

Answer: ₦520,000

Answer

The total Cost of Production for the year is ₦520,000.

The total Cost of Production of ₦520,000 is correctly calculated by summing the Prime Cost (₦400,000), Factory Overheads (₦100,000), and Opening Work-in-Progress (₦35,000), then subtracting Closing Work-in-Progress (₦15,000).

Step-by-Step Solution

1

Calculate Cost of Raw Materials Consumed

��50,000 + ₦200,000 + ₦10,000 - ₦40,000 = ₦220,000

Carriage inwards is added to raw material purchases while closing raw material inventory is deducted.

2

Calculate Prime Cost

₦220,000 (Raw Materials) + ₦150,000 (Direct Wages) + ₦30,000 (Direct Expenses) = ₦400,000

Prime cost is the sum of all direct costs of production.

3

Calculate Total Factory Overheads

₦60,000 (Factory Rent) + ₦40,000 (Depreciation) = ₦100,000

Factory overheads consist of all indirect manufacturing expenses incurred in the factory.

4

Calculate Cost of Production

₦400,000 (Prime Cost) + ₦100,000 (Factory Overheads) + ₦35,000 (Opening WIP) - ₦15,000 (Closing WIP) = ₦520,000

Cost of production is obtained by adding factory overheads and opening work-in-progress to prime cost, and deducting closing work-in-progress.

Key Concept

Calculation of Cost of Production in Manufacturing Accounts

Estimated Time:1m 30s

Question 59Question →

Complete the financial statement adjustment statement by calculating the correct value for the blank.

Fill in the blanks below

A firm transfers manufactured goods to its trading department at a transfer price featuring a

20\%

mark-up on production cost. If the closing inventory of finished goods held in the trading department is valued at a transfer price of

\text{₦}60,000

, the amount to be provided as provision for unrealized profit is

\text{₦}

.

Show answer & explanation

Answer

The provision for unrealized profit on closing inventory is ₦10,000.

The closing inventory of ₦60,000 is valued at transfer price, which incorporates a 20% profit mark-up on manufacturing cost. Converting the 20% (or

\frac{1}{5}

) mark-up on cost to margin on transfer price yields

\frac{1}{6}

. Taking

\frac{1}{6}

of ₦60,000 gives ₦10,000 as the required provision for unrealized profit.

Step-by-Step Solution

1

Convert the mark-up on cost to margin on transfer price.

A mark-up of 20% (or

\frac{1}{5}

) on cost translates to a margin of

\frac{1}{5 + 1} = \frac{1}{6}

on transfer price.

Since closing inventory is stated at transfer price (cost plus profit mark-up), the profit element must be calculated using margin relative to the transfer price.

2

Calculate the unrealized profit embedded in the closing inventory.

\frac{1}{6} \times \text{₦}60,000 = \text{₦}10,000

.

Multiplying the margin fraction by the total transfer price of closing inventory isolates the profit portion that remains unsold.

Key Concept

Provision for Unrealized Profit on Closing Inventory

Question 60Question →

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

\text{₦}192,700

\text{₦}197,000

\text{₦}229,700

Show answer & explanation

Answer: $\text{₦}201,300$

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

1

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.

2

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.

3

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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