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JAMB Principles of Accounts 2007 Question 4

Question 4

Manufacturing Accounts

Given:
Stock at start: Raw materials ₦57 000; Work-in-progress ₦42 000; Finished goods ₦71 000
Purchases of raw materials amount to ₦81 000, direct labour is ₦38 000 and factory overhead ₦29 000. Calculate the prime cost.

  1. A.₦176 000
  2. B.₦170 000
  3. C.₦167 000
  4. D.₦156 000.
Show the answer and explanation

Answer: A (₦176 000)

Explanation

Prime cost = raw materials used + direct labour = (57 000 + 81 000) + 38 000 = ₦176 000. Overheads and work-in-progress are not part of prime cost.