WAEC Accounting 2015 Theory — Question 9

Model answer

(i) Prime cost: This is the total cost of direct material and direct labour. It records/shows all costs that can be traced directly to the unit of output produced. (ii) Factory overheads: This can be defined as the total of all indirect costs which cannot be traced directly to the unit of output produced. (iii) Work-in-progress: This is the cost of all goods which started but are not yet completed for consumption. These goods have been processed from raw materials but have not reached the final stage of finished goods. (iv) Cost of goods transferred: This can be defined as the cost of goods produced which has been transferred to stock as finished goods. (v) Finished goods: These are stocks that are ready to be sold to consumers - they are completed goods. (vi) Profit on manufacturing: This is the difference between the cost of goods produced and the market value at which the goods are transferred to stock.