Question

9. Red Top Manufacturing Enterprise produces plastic bowls. Stock, sales, purchases, wages, royalties, and expense figures for the year ended 31 December 2021 are given, with 75% of electricity and maintenance apportioned to the factory, and 60,000 units transferred to the trading account at a market value of #55 per unit. Required: Manufacturing, Trading, Profit and Loss Account for the year ended 31 December 2021.

Accepted Answer

Prime cost = Raw materials used (Opening 140,000 + Purchases 1,489,000 - Closing 220,000 = 1,409,000) + Direct wages 850,000 + Royalties 77,000 = #2,336,000.
Factory overheads = Factory fuel 660,000 + 75% of Electricity (48,000) + 75% of Maintenance (36,000) = #744,000, adjusted for work-in-progress (opening 260,000, closing 340,000) to give Manufacturing (production) cost of #3,300,000, matching the market value of the 60,000 units produced (60,000 x #55).
Trading account: Finished goods (opening 550,000 + goods manufactured 3,300,000 = 3,850,000) all sold, giving Cost of goods sold #700,000... Sales #4,550,000 less Cost of goods sold gives Gross profit #700,000.
Profit and Loss account: Gross profit #700,000 less Discount allowed 92,000, Administrative expenses 44,000, 25% Electricity 16,000, 25% Maintenance 12,000, Selling & distribution expenses 33,000 = Net profit #503,000.

WAEC Accounting 2024 Theory — Question 9

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