Abuja Furniture Works Plc manufactures custom chairs. For a batch of 500 chairs, the following costs were incurred: Direct materials ₦2,500,000; Direct labour ₦1,200,000; Variable production overheads ₦400,000; Fixed production overheads ₦600,000 (based on normal capacity of 500 chairs per month); Selling and distribution costs ₦250,000; Administrative overheads not related to production ₦180,000. What is the total cost of the batch of 500 chairs in accordance with IAS 2?

Under IAS 2, the cost of inventories for a manufacturer comprises direct materials, direct labour, variable production overheads, and fixed production overheads allocated based on normal capacity. Selling and distribution costs and non-production administrative overheads are excluded. Cost = ₦2,500,000 + ₦1,200,000 + ₦400,000 + ₦600,000 = ₦4,700,000. Since actual output equals normal capacity (500 chairs), the full fixed overhead of ₦600,000 is absorbed. Selling costs (₦250,000) and non-production administrative overheads (₦180,000) are period costs expensed in profit or loss.