NOTE:

This is a work in progress. All topics in the syllabus are covered but editing for
necessary corrections is in progress.
Thanks.

costs for the 2000 accounting year had been as follows:

Direct wages

N8,000,000

Direct material cost

5,000,000

Direct expenses

1,500,000

Production overhead cost

2,400,000

Total shoe manufactured

160,000 units

Machine time used

10,000 hours

Direct Labour time used

40,000 hours

500 pairs of shoes were produced during the first two weeks of the year as a single
job, which had a direct wages cost of N8,000, direct material cost of N5,000 and
direct expenses of N1,500. The company apportions fixed overhead cost using the
percentage rate on direct wages and charges administrative expenses and selling
expenses at the rate of 15% and 10%, respectively, of production cost.
Required: Determine the following:
(i)

Production cost

(ii)

Total cost

(iii)

Cost per pairs of shoe

Solution
Star Modern Shoemakers Company Ltd, Wambai, Kano
Computation of Production Cost & Total Cost

Direct wages

8,000

Direct material cost

5,000

Direct expenses

1,500

Prime cost
Production Overhead
Production Cost

14,500
2,400
16,900 (i)

Admin. expenses

2,535

Selling expenses

1,690

Total Cost

21,125 (ii)

211

NOTE:

This is a work in progress. All topics in the syllabus are covered but editing for
necessary corrections is in progress.
Thanks.

(iii) Cost per pairs of shoe = 21,125/ 500 = N42.25

Workings
1.

% Rate on Direct wages = N2,400,000

x 100 = 30%

N8,000,000

2.

Production Overhead cost on the job = 30% of 8,000 = N2,400

3.

Administrative expenses = 15% of 16,900 = N2335

4.

Selling expenses = 10% of 16,900

= N1690

212