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JAMB Principles of Accounts 2004 Question 26

Question 26

Manufacturing Accounts

Use the information below to answer questions 26 and 27.
Materials consumed ₦16,600
Direct cost ₦5,400
Factory rent ₦2,300
Factory lighting ₦1,200
Cost of production to be transferred at cost plus 20% mark-up.
The gross profit on manufacture is

  1. A.₦6,120
  2. B.₦6,100
  3. C.₦5,100
  4. D.₦5,000
Show the answer and explanation

Answer: C (₦5,100)

Explanation

Cost of production = 16,600 + 5,400 + 2,300 + 1,200 = ₦25,500. Profit on manufacture = 20% × 25,500 = ₦5,100.