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JAMB Principles of Accounts 1997 Question 30

Question 30

Manufacturing Accounts

The understatement of closing value of work-in-process would have the effect of

  1. A.understating cost of goods manufactured
  2. B.overstating prime cost of goods manufactured
  3. C.overstating cost of goods manufactured
  4. D.understating prime cost of goods manufactured.
Show the answer and explanation

Answer: C (overstating cost of goods manufactured)

Explanation

Closing work-in-progress is deducted from factory cost, so understating it overstates the cost of goods manufactured.