Manufacturing Accounts Alıştırma Soruları — JAMB UTME

Soru 1Soru →

The following financial figures were extracted from the books of Kemi Manufacturing Enterprises for the year ended 31st December 2025:

- Prime Cost: $\text{N}150,000$
- Factory Overheads: $\text{N}45,000$
- Opening Work-in-Progress: $\text{N}12,000$
- Closing Work-in-Progress: $\text{N}17,000$

What is the Cost of Production for the year?

Cevabı ve açıklamayı göster

Cevap: 190000

Cevap

The Cost of Production is 190,000 Naira.

The Cost of Production is calculated using the formula: Prime Cost + Factory Overheads + Opening Work-in-Progress - Closing Work-in-Progress. Substituting the values:

\text{N}150,000 + \text{N}45,000 + \text{N}12,000 - \text{N}17,000 = \text{N}190,000

.

Adım Adım Çözüm

1

Add Factory Overheads to Prime Cost

\text{N}150,000 + \text{N}45,000 = \text{N}195,000

Factory overheads are added to prime cost to determine the total factory cost before work-in-progress adjustments.

2

Add Opening Work-in-Progress

\text{N}195,000 + \text{N}12,000 = \text{N}207,000

Opening work-in-progress represents unfinished goods from the previous period completed in the current period.

3

Deduct Closing Work-in-Progress

\text{N}207,000 - \text{N}17,000 = \text{N}190,000

Closing work-in-progress represents unfinished goods at the end of the period and must be deducted to find the cost of fully produced goods.

Anahtar Kavram

Calculation of Cost of Production from Prime Cost, Factory Overheads, and Work-in-Progress adjustments.

Soru 2Soru →

In a manufacturing firm producing leather footwear, various expenses are incurred during the production process. Which of the following costs is classified as a direct expense and included in the calculation of Prime Cost?

Royalties paid to a designer based on the specific number of units produced

Salary paid to the factory quality control supervisor

Carriage outwards paid for delivering finished footwear to distributors

Cost of purchasing a new industrial leather-cutting machine

Cevabı ve açıklamayı göster

Cevap: Royalties paid to a designer based on the specific number of units produced

Cevap

Royalties paid to a designer based on the specific number of units produced

Royalties paid per unit produced are direct expenses because they can be traced completely to individual manufactured items. Adding direct expenses to direct materials and direct labor gives Prime Cost.

Adım Adım Çözüm

1

Understand the components of Prime Cost

Prime Cost consists of direct materials, direct labor, and direct expenses.

Prime Cost includes all expenditure directly traceable to the physical unit of production.

2

Identify the nature of direct expenses

Direct expenses are expenses other than direct materials and direct labor incurred specifically for a particular product or batch (e.g., royalties paid per unit produced or specialized equipment hire).

Royalties paid on a per-unit basis can be directly attributed to each item manufactured.

3

Differentiate direct expenses from indirect manufacturing overheads and non-manufacturing costs

Factory supervisor salary is indirect labor (factory overhead); carriage outwards is a selling expense; machinery purchase is capital expenditure.

Only royalties paid per unit manufactured meet the strict definition of direct expenses.

Anahtar Kavram

Direct Costs and Prime Cost Classification

Tahmini Süre:1m 0s

Soru 3Soru →

The following financial records were extracted from the books of Bayo Craftsmanship Ltd for the year ended 31 December 2025:

Account Item	Amount ( $\text{₦}$ )
Stock of raw materials (1 Jan 2025)	$15,000$
Stock of raw materials (31 Dec 2025)	$12,000$
Purchases of raw materials	$85,000$
Carriage inwards on raw materials	$4,000$
Direct factory wages	$45,000$
Production royalties	$8,000$
Factory rent	$18,000$
Depreciation of factory plant	$6,000$

Calculate the total Prime Cost for the year in Naira ( $\text{₦}$ ).

Cevabı ve açıklamayı göster

Cevap: 145000

Cevap

The Prime Cost for the year is ₦145,000.

Prime Cost is the sum total of all direct expenses incurred in production. It is calculated as Cost of Raw Materials Consumed (

15,000 + 85,000 + 4,000 - 12,000 = 92,000

) plus Direct Factory Wages (

45,000

) plus Production Royalties (

8,000

), yielding

\text{₦}145,000

. Indirect costs like factory rent and depreciation are overheads and must be excluded.

Adım Adım Çözüm

1

Calculate the Cost of Raw Materials Consumed

₦92,000

Cost of raw materials consumed is found by adding carriage inwards to purchases of raw materials, adding opening stock, and deducting closing stock:

15,000 + 85,000 + 4,000 - 12,000 = 92,000

.

2

Identify all direct manufacturing cost components

Raw Materials Consumed (₦92,000), Direct Factory Wages (₦45,000), and Production Royalties (₦8,000)

Prime Cost consists strictly of direct costs (Direct Materials + Direct Labour + Direct Expenses).

3

Sum the direct costs to arrive at Prime Cost

₦145,000

Adding raw materials consumed, direct labor, and production royalties:

92,000 + 45,000 + 8,000 = 145,000

.

Anahtar Kavram

Prime Cost consists of the sum of direct materials consumed, direct wages/labour, and direct expenses (such as royalties). Indirect expenses like factory rent and plant depreciation belong to factory overheads.

Soru 4Soru →

WoodenCraft Nigeria Ltd produced custom office furniture during a financial period and compiled the following cost figures:

Cost Component	Amount (₦)
Raw timber consumed	450,000
Wages of workshop carpenters	280,000
Carriage inwards on raw timber	35,000
Direct hire of specialized carving machinery	45,000
Factory supervisor's salary	90,000
Factory power and electricity	60,000
Carriage outwards on finished furniture	25,000

What is the total Prime Cost for the production period?

₦730,000

₦810,000

₦835,000

₦960,000

Cevabı ve açıklamayı göster

Cevap: ₦810,000

Cevap

The Prime Cost is ₦810,000.

Prime Cost represents the sum of all direct production costs: Direct Materials Consumed (including carriage inwards on raw materials), Direct Wages/Labor, and Direct Expenses (such as royalties or direct hire of plant). Here,

\text{Prime Cost} = \text{₦}450,000 + \text{₦}35,000 + \text{₦}280,000 + \text{₦}45,000 = \text{₦}810,000

.

Adım Adım Çözüm

1

Identify all direct cost elements

Direct Materials = Raw timber (₦450,000) + Carriage inwards on timber (₦35,000) = ₦485,000; Direct Labour = Wages of carpenters (₦280,000); Direct Expenses = Direct hire of specialized machinery (₦45,000).

Prime Cost comprises all costs directly traceable to production: direct materials, direct labor, and direct expenses.

2

Calculate total Prime Cost

\text{Prime Cost} = \text{₦}485,000 + \text{₦}280,000 + \text{₦}45,000 = \text{₦}810,000

.

Adding these direct costs gives the complete Prime Cost prior to incorporating factory overheads.

Anahtar Kavram

Calculation of Prime Cost in Manufacturing Accounts

Tahmini Süre:1m 30s

Soru 5Soru →

Match each cost item incurred by a manufacturing enterprise to its correct accounting classification in the financial statements.

Soldaki öğeye tıklayın, sonra eşleşen sağdaki öğeye tıklayın

Cevabı ve açıklamayı göster

Cevap

Factory supervisor's salary matches Factory Overhead (Indirect Labor Cost); Depreciation of factory plant and machinery matches Factory Overhead (Indirect Expense); Carriage inwards on raw materials matches Prime Cost (Direct Material Cost); Sales manager's commission matches Selling and Distribution Expense.

Factory overheads include all indirect manufacturing expenses incurred in the factory building, such as indirect labor (factory supervisor salary) and indirect factory operational costs (depreciation of factory machinery). Direct costs related to raw material acquisition (carriage inwards) increase prime cost, whereas post-production expenses (sales commission) belong to administrative or selling expenses.

Adım Adım Çözüm

1

Identify factory overheads (indirect manufacturing costs)

Factory supervisor's salary is categorized as indirect labor, while depreciation of factory machinery is categorized as an indirect factory expense.

Indirect costs incurred within the production environment that cannot be conveniently assigned to specific units produced constitute factory overheads.

2

Identify prime cost components

Carriage inwards on raw materials is added to the cost of raw materials purchased.

Carriage inwards forms an integral part of the direct material cost required to bring raw materials to their present location and condition.

3

Distinguish manufacturing costs from selling expenses

Sales manager's commission is classified as a selling and distribution expense.

Expenses connected with the sale and distribution of finished goods are charged directly to the Profit and Loss Account rather than the Manufacturing Account.

Anahtar Kavram

Classification of manufacturing expenditures into direct costs (prime cost), factory overheads (indirect labor and indirect expenses), and administrative or selling expenses.

Soru 6Soru →

The following extract was taken from the books of Koko Furniture Manufacturing Enterprise for the year ended 31st December 2025:

Item	Amount (₦)
Factory rent paid	180,000
Direct wages paid	250,000
Factory supervisor salary paid	120,000
Factory power and lighting	45,000
Depreciation of factory plant	30,000

Additional information:
1. Prepaid factory rent at the end of the year amounted to ₦30,000.
2. Factory supervisor salary accrued at the year end was ₦15,000.

What is the total amount of factory overheads to be charged in the manufacturing account?

₦360,000

₦610,000

₦390,000

₦375,000

Cevabı ve açıklamayı göster

Cevap: ₦360,000

Cevap

₦360,000

The total factory overheads calculation properly includes only indirect manufacturing costs adjusted for accruals and prepayments: adjusted factory rent (₦180,000 paid minus ₦30,000 prepaid = ₦150,000), adjusted factory supervisor salary (₦120,000 paid plus ₦15,000 accrued = ₦135,000), factory power and lighting (₦45,000), and depreciation of factory plant (₦30,000). Direct wages of ₦250,000 are a prime cost element and are correctly excluded. Summing these items yields ₦360,000.

Adım Adım Çözüm

1

Identify indirect costs and exclude direct costs

Direct wages of ₦250,000 are excluded because they form part of Prime Cost, not Factory Overheads.

Factory overheads only comprise indirect manufacturing costs.

2

Adjust indirect expenses for prepayments and accruals

Adjusted Factory Rent = ₦180,000 - ₦30,000 (prepayment) = ₦150,000. Adjusted Supervisor Salary = ₦120,000 + ₦15,000 (accrual) = ₦135,000.

Prepaid expenses relate to future periods and must be deducted, while accrued expenses relate to the current period and must be added.

3

Sum all indirect manufacturing costs to find total factory overheads

Total Factory Overheads = ₦150,000 (Rent) + ₦135,000 (Supervisor Salary) + ₦45,000 (Power & Lighting) + ₦30,000 (Depreciation) = ₦360,000.

The manufacturing account aggregates all indirect factory expenses to determine total factory overheads.

Anahtar Kavram

Factory Overheads and Indirect Manufacturing Costs

Soru 7Soru →

A cost accountant is reviewing the components of a Manufacturing Account for a furniture manufacturing firm. Match each specific production cost item or adjustment on the left with its appropriate treatment in the Cost of Production schedule on the right.

Soldaki öğeye tıklayın, sonra eşleşen sağdaki öğeye tıklayın

Cevabı ve açıklamayı göster

Cevap

Royalty paid per unit of item produced matches with direct expense in Prime Cost; Factory supervisor's salary and plant depreciation matches with indirect manufacturing costs under Factory Overheads; Net decrease in Work-in-Progress matches with being added to Prime Cost and Factory Overheads; Carriage inwards on raw materials matches with being added to direct materials cost to find cost of raw materials consumed.

Each item is correctly matched according to standard cost accounting rules for manufacturing accounts: Carriage inwards adds to raw materials cost, royalties form part of direct expenses within Prime Cost, supervisory salaries and plant depreciation are factory overheads, and a net decrease in WIP increases the overall cost of production.

Adım Adım Çözüm

1

Classify direct costs

Identify that raw material carriage inwards increases the raw material purchase cost, while unit-based production royalties are direct expenses forming part of Prime Cost.

Direct costs are expenses directly traceable to the unit of output.

2

Classify indirect costs

Group factory supervisor salaries and plant depreciation into Factory Overheads.

Indirect manufacturing costs support production but cannot be assigned directly to individual units.

3

Apply Work-in-Progress adjustment rules

Determine that a net decrease in WIP (

Opening\ WIP > Closing\ WIP

) represents additional cost absorbed during the period, thereby increasing the Cost of Production.

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

Anahtar Kavram

Preparation of Manufacturing Account and Cost of Production

Tahmini Süre:1m 30s

Soru 8Soru →

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

Financial Item	Amount (\text{NGN})
Sales of finished goods	$650{}000$
Opening stock of finished goods	$50{}000$
Cost of production transferred from Manufacturing Account	$380{}000$
Closing stock of finished goods	$60{}000$
Rent paid	$40{}000$
General administrative expenses	$36{}000$
Selling and distribution expenses	$25{}000$

Additional Information:
At 31st December 2025, rent accrued amounted to $\text{NGN } 4{}000$ .

What is the Net Profit of Ade Manufacturing Enterprise for the year ended 31st December 2025?

Cevabı ve açıklamayı göster

Cevap: 175000

Cevap

The Net Profit for Ade Manufacturing Enterprise for the year ended 31st December 2025 is NGN 175,000.

The correct Net Profit of NGN 175,000 is obtained by first deriving the Gross Profit of NGN 280,000 (Sales of NGN 650,000 minus COGS of NGN 370,000) and then deducting total period operating expenses of NGN 105,000 (Rent expense of NGN 44,000 including NGN 4,000 accrual, Administrative expenses of NGN 36,000, and Selling & distribution expenses of NGN 25,000).

Adım Adım Çözüm

1

Calculate the Cost of Goods Sold (COGS)

\text{COGS} = \text{NGN } 50{}000 + \text{NGN } 380{}000 - \text{NGN } 60{}000 = \text{NGN } 370{}000

Cost of Goods Sold is obtained by adding the cost of production transferred from the manufacturing account to opening finished goods inventory and subtracting closing finished goods inventory.

2

Calculate the Trading Gross Profit

\text{Gross Profit} = \text{NGN } 650{}000 - \text{NGN } 370{}000 = \text{NGN } 280{}000

Gross profit is determined by deducting the cost of goods sold from total turnover (sales of finished goods).

3

Calculate Total Operating Expenses including accruals

\text{Total Expenses} = (\text{NGN } 40{}000 + \text{NGN } 4{}000) + \text{NGN } 36{}000 + \text{NGN } 25{}000 = \text{NGN } 105{}000

Accrued rent at year-end represents an unpaid expense of the current period and must be added to rent paid before aggregating administrative and selling expenses.

4

Calculate Net Profit

\text{Net Profit} = \text{NGN } 280{}000 - \text{NGN } 105{}000 = \text{NGN } 175{}000

Net Profit is computed by subtracting total operating expenses from the trading gross profit.

Anahtar Kavram

Preparation of Trading and Profit & Loss Account for Manufacturing Entities

Soru 9Soru →

The following figures were extracted from the books of Adeola Manufacturing Enterprise for the year ended 31st December 2025:

Cost Component	Amount ( $\text{N}$ )
Prime Cost	$400,000$
Factory Overheads	$100,000$

Finished goods are transferred from the factory to the trading account at market value, calculated at a mark-up of $25\%$ on the total cost of production. What is the manufacturing profit for the year?

\text{N}100,000

\text{N}125,000

\text{N}156,250

\text{N}625,000

Cevabı ve açıklamayı göster

Cevap: $\text{N}125,000$

Cevap

The manufacturing profit for the year is

\text{N}125,000

.

The correct response of

\text{N}125,000

is determined by first computing total cost of production (Prime Cost of

\text{N}400,000

+ Factory Overheads of

\text{N}100,000 = \text{N}500,000

) and then taking

25\%

of that amount (

0.25 \times \text{N}500,000 = \text{N}125,000

).

Adım Adım Çözüm

1

Calculate the total cost of production

\text{Total Cost of Production} = \text{Prime Cost} + \text{Factory Overheads} = \text{N}400,000 + \text{N}100,000 = \text{N}500,000

Manufacturing profit is added to the total cost of production to determine the transfer value.

2

Calculate the manufacturing profit

\text{Manufacturing Profit} = 25\% \times \text{N}500,000 = \text{N}125,000

The mark-up of

25\%

is applied directly to the total cost of production.

Anahtar Kavram

Manufacturing profit represents the internal profit earned by the factory when finished goods are transferred to the trading account at market value rather than at cost price.

Tahmini Süre:1m 30s

Soru 10Soru →

During the financial year ended 31 December 2025, Tunde Industrial Crafts reported the following manufacturing cost figures:

- Direct materials consumed: ₦450,000
- Direct wages paid: ₦220,000
- Direct expenses: ₦80,000
- Factory overheads: ₦150,000
- Work-in-progress (1 January 2025): ₦60,000
- Work-in-progress (31 December 2025): ₦40,000

What is the total cost of production for the year?

₦920,000

₦880,000

₦900,000

₦770,000

Cevabı ve açıklamayı göster

Cevap: ₦920,000

Cevap

The total cost of production for the year is ₦920,000.

The correct total cost of production is derived by first adding direct materials (₦450,000), direct wages (₦220,000), and direct expenses (₦80,000) to find Prime Cost of ₦750,000. Adding factory overheads (₦150,000) gives ₦900,000. Adjusting for work-in-progress (+ ₦60,000 opening WIP - ₦40,000 closing WIP) yields ₦920,000.

Adım Adım Çözüm

1

Calculate Prime Cost

Prime Cost = Direct Materials (₦450,000) + Direct Wages (₦220,000) + Direct Expenses (₦80,000) = ₦750,000

Prime cost comprises all direct manufacturing expenditures.

2

Add Factory Overheads to Prime Cost

Total Factory Overhead Cost = ₦750,000 + ₦150,000 = ₦900,000

Factory overheads represent indirect factory operational expenses.

3

Adjust for Opening and Closing Work-in-Progress

Cost of Production = ₦900,000 + Opening WIP (₦60,000) - Closing WIP (₦40,000) = ₦920,000

Opening work-in-progress is added to current production expenditures while uncompleted closing work-in-progress is deducted.

Anahtar Kavram

Preparation of Manufacturing Account and Cost of Production

Tahmini Süre:1m 30s

Soru 11Soru →

Match each manufacturing accounting item or formula on the left with its correct accounting classification or term on the right.

Soldaki öğeye tıklayın, sonra eşleşen sağdaki öğeye tıklayın

Cevabı ve açıklamayı göster

Cevap

The correct matches are: (1) Prime Cost + Factory Overheads + Opening WIP - Closing WIP matches Cost of Production; (2) Raw Materials Consumed + Direct Wages + Royalties matches Prime Cost; (3) Factory Building Rent + Plant Depreciation + Factory Supervisor Salary matches Factory Overheads; (4) Market Value of Finished Goods Produced - Cost of Production matches Manufacturing Profit.

Each item on the left represents a fundamental accounting equation or cost combination that uniquely aligns with its standard accounting terminology on the right in manufacturing account preparation.

Adım Adım Çözüm

1

Determine the formula for Cost of Production

Prime Cost + Factory Overheads + Opening Work-in-Progress - Closing Work-in-Progress = Cost of Production

The cost of completed production requires combining prime costs with indirect factory expenses and adjusting for incomplete goods at the start and end of the period.

2

Identify the elements constituting Prime Cost

Raw Materials Consumed + Direct Wages + Royalties / Direct Production Expenses = Prime Cost

Prime cost is strictly the sum of directly traceable manufacturing costs.

3

Categorize indirect factory costs

Factory Building Rent + Plant Depreciation + Factory Supervisor's Salary = Factory Overheads

Expenses necessary to maintain factory operations that cannot be directly traced to individual products are classified as factory overheads.

4

Calculate Manufacturing Profit

Market Value of Finished Goods Produced - Cost of Production = Manufacturing Profit

When a firm transfers finished goods at market value, the differential over actual production cost measures the profitability of the manufacturing operation.

Anahtar Kavram

Classification and formulation of manufacturing account components and Cost of Production

Soru 12Soru →

The following extract of financial information was taken from the books of Kemi Manufacturing Enterprises for the financial year ended 31st December 2025:

Item	Amount (₦)
Opening inventory of raw materials	45,000
Purchases of raw materials	220,000
Carriage inwards on raw materials	15,000
Return outwards of raw materials	10,000
Direct manufacturing wages	130,000
Factory supervisor's salary	40,000
Royalties paid per production unit	25,000
Carriage outwards on finished goods	18,000
Depreciation of factory plant & machinery	22,000
Closing inventory of raw materials	50,000

Based on the figures provided, what is the total Prime Cost of production?

₦375,000

₦415,000

₦393,000

₦437,000

Cevabı ve açıklamayı göster

Cevap: ₦375,000

Cevap

The total Prime Cost of production is ₦375,000.

The correct figure of ₦375,000 is arrived at by determining the Cost of Raw Materials Consumed (Opening Stock ₦45,000 + Purchases ₦220,000 + Carriage Inwards ₦15,000 - Returns Outwards ₦10,000 - Closing Stock ₦50,000 = ₦220,000) and adding Direct Manufacturing Wages (₦130,000) and Direct Expenses/Royalties (₦25,000).

Adım Adım Çözüm

1

Calculate the Cost of Raw Materials Consumed

₦220,000

Cost of Raw Materials Consumed = Opening Inventory (₦45,000) + Purchases (₦220,000) + Carriage Inwards on Raw Materials (₦15,000) - Return Outwards of Raw Materials (₦10,000) - Closing Inventory (₦50,000) = ₦220,000.

2

Identify all direct production costs

Direct Wages = ₦130,000; Direct Expenses (Royalties) = ₦25,000

Royalties paid per unit produced are direct expenses; direct manufacturing wages are direct labor.

3

Sum up the components of Prime Cost

₦375,000

Prime Cost = Raw Materials Consumed (₦220,000) + Direct Wages (₦130,000) + Royalties (₦25,000) = ₦375,000.

Anahtar Kavram

Prime Cost represents the total sum of direct costs incurred in production: Direct Raw Materials Consumed + Direct Labor Wages + Direct Expenses (such as Royalties). Indirect costs (factory overheads) and administrative/distribution costs must be excluded.

Tahmini Süre:2m 0s

Soru 13Soru →

The following transactions and balance details were extracted from the books of Zenith Manufacturing Company for the year ended 31 December 2025:

Financial Item	Amount (₦)
Opening stock of raw materials	45,000
Purchases of raw materials	185,000
Carriage inwards on raw materials	12,500
Returns outwards of raw materials	8,000
Closing stock of raw materials	35,000
Direct manufacturing wages paid	95,000
Accrued direct manufacturing wages	15,000
Royalties paid on production	22,500
Factory rent and rates	40,000
Depreciation of factory machinery	18,000
Factory supervisor's salary	30,000

What is the total prime cost of the manufacturing entity for the year in Naira?

Cevabı ve açıklamayı göster

Cevap: 332000

Cevap

The total prime cost of the manufacturing entity for the year is ₦332,000.

Prime cost is calculated by summing direct materials consumed (₦199,500), direct labour adjusted for accruals (₦110,000), and direct expenses such as production royalties (₦22,500). Indirect items like factory rent, machinery depreciation, and supervisor salaries are factory overheads and are excluded from prime cost, giving a final answer of ₦332,000.

Adım Adım Çözüm

1

Calculate the cost of raw materials consumed during the production period

Raw Materials Consumed = ₦45,000 + ₦185,000 + ₦12,500 - ₦8,000 - ₦35,000 = ₦199,500

Carriage inwards is added to purchases to obtain the total cost of raw materials delivered, returns outwards are deducted, and closing stock is subtracted to determine materials actually used in production.

2

Adjust direct wages paid for accrued wages at the end of the financial period

Direct Labour = ₦95,000 + ₦15,000 = ₦110,000

Under the accrual concept of accounting, incurred costs belonging to the period must be added to payments made.

3

Identify direct expenses attributable directly to production

Direct Expenses = Royalties on production = ₦22,500

Royalties paid per unit produced are direct expenses because they vary directly with output.

4

Sum all direct cost components to find Prime Cost

Prime Cost = ₦199,500 + ₦110,000 + ₦22,500 = ₦332,000

Prime cost is the aggregate of direct materials consumed, direct labour, and direct expenses. Indirect factory costs such as factory rent (₦40,000), plant depreciation (₦18,000), and supervisor salary (₦30,000) are factory overheads and must be excluded.

Anahtar Kavram

Prime Cost Calculation in Manufacturing Accounts

Soru 14Soru →

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

Financial Item	Amount (₦)
Inventory of Raw Materials (1st January 2025)	45,000
Purchases of Raw Materials	180,000
Carriage Inwards on Raw Materials	12,000
Returns Outward of Raw Materials	8,000
Inventory of Raw Materials (31st December 2025)	52,000
Direct Factory Wages Paid	95,000
Direct Wages Accrued (31st December 2025)	15,000
Direct Wages Prepaid (1st January 2025)	5,000
Royalties Paid on Production	25,000
Hire of Special Machine for Production	10,000
Factory Supervisor's Salary	40,000
Factory Rent and Rates	30,000
Depreciation of Factory Machinery	18,000
Carriage Outwards on Finished Goods	14,000

Calculate the Prime Cost for Apex Manufacturing Enterprise for the year ended 31st December 2025.

Cevabı ve açıklamayı göster

Cevap: 327000

Cevap

The Prime Cost for Apex Manufacturing Enterprise for the year ended 31st December 2025 is ₦327,000.

Prime Cost is the sum of all direct costs incurred in manufacturing: Direct Materials Consumed (₦177,000) + Direct Labour (₦115,000) + Direct Expenses (₦35,000) = ₦327,000. Indirect costs (factory supervisor's salary, factory rent, and machinery depreciation) are factory overheads and must be excluded, as well as carriage outwards which is a selling expense.

Adım Adım Çözüm

1

Calculate Direct Raw Materials Consumed

₦177,000

Opening Raw Materials (₦45,000) + Purchases (₦180,000) + Carriage Inwards (₦12,000) - Returns Outward (₦8,000) - Closing Raw Materials (₦52,000) = ₦177,000.

2

Calculate Total Direct Labour Cost

₦115,000

Direct Wages Paid (₦95,000) + Accrued Direct Wages at year-end (₦15,000) + Prepaid Direct Wages at start of year (₦5,000) = ₦115,000.

3

Calculate Total Direct Expenses

₦35,000

Royalties Paid on Production (₦25,000) + Hire of Special Machine for Production (₦10,000) = ₦35,000.

4

Identify and exclude indirect overheads and non-manufacturing expenses

Indirect factory items and selling expenses excluded

Factory supervisor's salary (₦40,000), factory rent and rates (₦30,000), and depreciation of factory machinery (₦18,000) are indirect manufacturing costs (factory overheads). Carriage outwards (₦14,000) is a selling expense.

5

Sum all direct cost components to arrive at Prime Cost

₦327,000

Prime Cost = Direct Materials Consumed (₦177,000) + Direct Labour (₦115,000) + Direct Expenses (₦35,000) = ₦327,000.

Anahtar Kavram

Direct Costs and Calculation of Prime Cost

Tahmini Süre:3m 0s

Soru 15Soru →

The following details were extracted from the accounting records of Binta Manufacturing Ltd. for the year ended 31 December 2025:

Item	Amount (₦)
Stock of raw materials (1 January 2025)	45,000
Stock of raw materials (31 December 2025)	38,000
Purchases of raw materials	180,000
Carriage inwards on raw materials	12,000
Return outwards of raw materials	7,000
Direct factory labor paid	95,000
Direct factory labor accrued at year-end	5,000
Royalties paid on production	15,000
Factory power and lighting	34,000
Depreciation of factory machinery	22,000
Work-in-progress (1 January 2025)	28,000
Work-in-progress (31 December 2025)	31,000

What is the total Cost of Production for the year?

Cevabı ve açıklamayı göster

Cevap: 360000

Cevap

The total Cost of Production for the year is ₦360,000.

The Cost of Production is correctly determined by summing Prime Cost (₦307,000) and Factory Overheads (₦56,000), giving a gross production cost of ₦363,000, and adjusting for work-in-progress by adding opening WIP (₦28,000) and deducting closing WIP (₦31,000) to arrive at ₦360,000.

Adım Adım Çözüm

1

Calculate Cost of Raw Materials Consumed

₦192,000

Raw materials consumed equals opening stock of raw materials plus net purchases and carriage inwards, less closing stock of raw materials:

45,000 + 180,000 + 12,000 - 7,000 - 38,000 = 192,000

.

2

Calculate Total Direct Labor Cost

₦100,000

Direct labor must include accrued wages incurred during the accounting period:

95,000 + 5,000 = 100,000

.

3

Determine Prime Cost

₦307,000

Prime Cost is the sum of direct raw materials consumed, direct labor, and direct expenses (royalties):

192,000 + 100,000 + 15,000 = 307,000

.

4

Calculate Total Factory Overheads

₦56,000

Factory Overheads include all indirect manufacturing costs (factory power and lighting + machinery depreciation):

34,000 + 22,000 = 56,000

.

5

Compute Total Manufacturing Operations Cost before Work-in-Progress Adjustments

₦363,000

Add Factory Overheads to Prime Cost:

307,000 + 56,000 = 363,000

.

6

Adjust for Opening and Closing Work-in-Progress to derive Cost of Production

₦360,000

Add opening work-in-progress and subtract closing work-in-progress from total manufacturing operations cost:

363,000 + 28,000 - 31,000 = 360,000

.

Anahtar Kavram

Manufacturing Account Preparation and Calculation of Cost of Production

Soru 16Soru →

A manufacturing enterprise transfers finished goods from its factory to the trading section at a mark-up of $25\%$ on manufacturing cost. For the financial year ended 31 December 2025, the opening inventory of finished goods at transfer price was $\text{₦}30,000$ with an existing provision for unrealized profit of $\text{₦}6,000$ . The closing inventory of finished goods at transfer price was $\text{₦}45,000$ . What is the amount of provision for unrealized profit to be debited to the Profit and Loss Account for the year?

\text{₦}3,000

\text{₦}5,250

\text{₦}9,000

\text{₦}11,250

Cevabı ve açıklamayı göster

Cevap: $\text{₦}3,000$

Cevap

The amount to be debited to the Profit and Loss Account as provision for unrealized profit is

\text{₦}3,000

.

To determine the provision for unrealized profit, convert the

25\%

mark-up on cost to a margin on transfer value:

\frac{25}{125} = 20\%

(or

\frac{1}{5}

). Applying this fraction to the closing inventory transfer value of

\text{₦}45,000

yields a closing provision of

\text{₦}9,000

. Subtracting the existing opening provision of

\text{₦}6,000

gives a net increase of

\text{₦}3,000

, which is debited to the Profit and Loss Account.

Adım Adım Çözüm

1

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

\text{Margin} = \frac{\text{Mark-up}}{100 + \text{Mark-up}} = \frac{25}{125} = \frac{1}{5} \text{ or } 20\%

.

Because inventory is valued at transfer price, the profit element contained within it must be determined using the margin ratio.

2

Calculate the total provision for unrealized profit required on closing inventory.

\text{Closing Provision} = \frac{1}{5} \times \text{₦}45,000 = \text{₦}9,000

.

This isolates the profit element that remains unrealized in unsold inventory at year-end.

3

Determine the net adjustment required in the Profit and Loss Account.

\text{Increase in Provision} = \text{₦}9,000 - \text{₦}6,000 = \text{₦}3,000

.

Only the net increase in the provision from the opening balance (

\text{₦}6,000

) is charged to the Profit and Loss Account.

Anahtar Kavram

Provision for Unrealized Profit on Closing Inventory

Soru 17Soru →

A manufacturing business reported a Prime Cost of $\text{₦}248,500$ for its operational year. The financial records contain the following summary of costs:

Cost Component	Amount (\text{₦})
Opening inventory of raw materials	28,000
Closing inventory of raw materials	32,000
Direct factory wages	95,000
Carriage inwards on raw materials	6,500
Factory supervisor salary	24,000
Production royalty	14,000
Depreciation of factory plant	18,000

What was the total cost of raw materials purchased during the year?

\text{₦}137,000

\text{₦}113,000

\text{₦}95,000

\text{₦}150,000

Cevabı ve açıklamayı göster

Cevap: \text{₦}137,000

Cevap

\text{₦}137,000

The value of \text{₦}137,000 is obtained by first subtracting direct labor (\text{₦}95,000) and production royalties (\text{₦}14,000) from Prime Cost (\text{₦}248,500), yielding raw materials consumed of \text{₦}139,500. Working backward through raw materials consumed (Opening Inventory + Purchases + Carriage Inwards - Closing Inventory) gives Purchases = \text{₦}139,500 - \text{₦}28,000 - \text{₦}6,500 + \text{₦}32,000 = \text{₦}137,000.

Adım Adım Çözüm

1

Identify direct costs and exclude factory overheads

Direct costs comprise Direct Raw Materials Consumed, Direct Wages (\text{₦}95,000), and Production Royalty (\text{₦}14,000). Factory supervisor salary (\text{₦}24,000) and plant depreciation (\text{₦}18,000) are indirect factory overheads and must be excluded.

Prime Cost includes only direct costs directly traceable to unit production.

2

Calculate Raw Materials Consumed from Prime Cost formula

\text{Prime Cost} = \text{Raw Materials Consumed} + \text{Direct Wages} + \text{Direct Expenses}

\text{₦}248,500 = \text{Raw Materials Consumed} + \text{₦}95,000 + \text{₦}14,000

\text{Raw Materials Consumed} = \text{₦}248,500 - \text{₦}109,000 = \text{₦}139,500

Rearranging the Prime Cost equation isolates the total cost of raw materials consumed.

3

Calculate Raw Material Purchases using the inventory equation

\text{Raw Materials Consumed} = \text{Opening Inventory} + \text{Purchases} + \text{Carriage Inwards} - \text{Closing Inventory}

\text{₦}139,500 = \text{₦}28,000 + \text{Purchases} + \text{₦}6,500 - \text{₦}32,000

\text{₦}139,500 = \text{Purchases} + \text{₦}2,500

\text{Purchases} = \text{₦}139,500 - \text{₦}2,500 = \text{₦}137,000

Carriage inwards increases raw material acquisition cost while inventory changes adjust for stock held across periods.

Anahtar Kavram

Prime cost is the sum of direct materials consumed, direct labor, and direct expenses. Factory overheads must be omitted from Prime Cost calculations.

Tahmini Süre:2m 0s

Soru 18Soru →

Read the financial scenario below and calculate the required provision amount to complete the statement.

Aşağıdaki boşlukları doldurun

A manufacturing firm transfers finished goods from the factory to the trading department at a mark-up of

20\%

on cost. If the closing inventory of finished goods valued at transfer price is

\text{₦}12,000

, the provision for unrealized profit required for the closing inventory is

\text{₦}

.

Cevabı ve açıklamayı göster

Cevap

The provision for unrealized profit on closing inventory is ₦2,000.

When finished goods are transferred at a mark-up of

20\%

on cost, the transfer price represents

120\%

of manufacturing cost. Therefore, the profit element embedded in closing inventory at transfer price is calculated as

\frac{20}{120} \times \text{₦}12,000 = \text{₦}2,000

.

Adım Adım Çözüm

1

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

A mark-up of

20\%

on cost (

\frac{20}{100}

) equals a margin of

\frac{20}{100 + 20} = \frac{20}{120} = \frac{1}{6}

on transfer price.

Closing inventory is valued at transfer price, so the profit portion must be determined using the profit margin relative to transfer price.

2

Calculate the unrealized profit included in closing inventory.

Unrealized Profit =

\frac{1}{6} \times \text{₦}12,000 = \text{₦}2,000

.

The provision for unrealized profit eliminates the internal profit element included in unsold inventory at the end of the accounting period.

Anahtar Kavram

Provision for Unrealized Profit on Closing Inventory

Soru 19Soru →

The following figures were extracted from the books of Ade & Sons Manufacturing Enterprises for the financial year ended 31st December 2025:

- Direct materials used: ₦145,000
- Direct labor cost: ₦65,000
- Factory overhead expenses: ₦38,000
- Opening work-in-progress (1st Jan 2025): ₦22,000
- Closing work-in-progress (31st Dec 2025): ₦27,000

What is the total cost of production for the year?

Cevabı ve açıklamayı göster

Cevap: 243000

Cevap

The total cost of production for the year is ₦243,000.

To calculate the total cost of production, add direct materials consumed (₦145,000) and direct labor (₦65,000) to find the prime cost of ₦210,000. Add factory overhead expenses (₦38,000) to obtain the gross cost of production of ₦248,000. Finally, add opening work-in-progress (₦22,000) and subtract closing work-in-progress (₦27,000) to arrive at the net cost of production of ₦243,000.

Adım Adım Çözüm

1

Calculate Prime Cost

₦210,000

Prime cost is the sum of all direct manufacturing costs, including direct materials consumed and direct labor.

2

Add Factory Overheads

₦248,000

Factory overheads represent indirect factory costs incurred during the manufacturing process.

3

Adjust for Opening and Closing Work-in-Progress

₦243,000

Opening WIP is added because it represents partially finished goods from the previous period completed in the current period. Closing WIP is deducted because it represents partially finished goods that are not yet complete at year-end.

Anahtar Kavram

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

Soru 20Soru →

Apex Manufacturing Enterprise transfers its completed goods from the factory to the trading section at a transfer price that includes a $25\%$ mark-up on production cost. On 1 January 2025, the opening inventory of finished goods was valued at its transfer price of $\text{₦}50,000$ , with an existing provision for unrealized profit of $\text{₦}10,000$ . At the financial year-end on 31 December 2025, the closing inventory of finished goods at transfer price was $\text{₦}75,000$ . What is the net amount to be charged to the Profit and Loss Account as an adjustment for unrealized profit for the year?

\text{₦}5,000

\text{₦}8,750

\text{₦}15,000

\text{₦}18,750

Cevabı ve açıklamayı göster

Cevap: $\text{₦}5,000$

Cevap

\text{₦}5,000

The correct answer is calculated by converting the

25\%

mark-up on production cost into a

20\%

margin on transfer price. Applying

20\%

to the closing inventory value of

\text{₦}75,000

yields a total required provision of

\text{₦}15,000

. Subtracting the existing opening provision of

\text{₦}10,000

gives the net increase of

\text{₦}5,000

to be debited to the Profit and Loss Account.

Adım Adım Çözüm

1

Convert mark-up on cost to margin on transfer price

Margin =

\frac{\text{Mark-up}}{100 + \text{Mark-up}} = \frac{25}{125} = \frac{1}{5} \text{ or } 20\%

Because finished goods inventory is stated at transfer price (cost plus mark-up), the profit element included must be calculated using margin on transfer price.

2

Calculate required closing provision for unrealized profit

Closing Provision =

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

The closing inventory contains

\text{₦}15,000

of profit created internally that has not been realized through external sales.

3

Determine the net adjustment for the Profit and Loss Account

Net Charge =

\text{Closing Provision} - \text{Opening Provision} = \text{₦}15,000 - \text{₦}10,000 = \text{₦}5,000

The Profit and Loss Account is only debited with the increase in provision required for the year.

Anahtar Kavram

Provision for Unrealized Profit on Closing Inventory

Manufacturing Accounts

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