GCEFinancial AccountingManufacturing Accounts2020

Aba Furniture Ltd provided the following for 2023: Direct materials consumed ₦200,000; Direct labour ₦150,000; Direct expenses ₦30,000; Indirect factory wages ₦45,000; Factory power and light ₦20,000; Depreciation of factory plant ₦15,000; Opening WIP ₦25,000; Closing WIP ₦35,000. What is the factory cost of production?

A₦450,000CORRECT
B₦460,000
C₦440,000
D₦485,000
AI
Toaster Teacher
Why the answer is A, and why the others tempt you.
Prime cost = ₦200,000 + ₦150,000 + ₦30,000 = ₦380,000. Factory overheads = ₦45,000 + ₦20,000 + ₦15,000 = ₦80,000. Total factory cost before WIP adjustment = ₦460,000. Cost of production = ₦460,000 + ₦25,000 (Opening WIP) − ₦35,000 (Closing WIP) = ₦450,000. Omitting the WIP adjustment gives ₦460,000, a common error.
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