Definition of Cost of Goods Manufactured
The cost of goods manufactured is a calculation of the production costs of the goods that were completed during an accounting period. In other words, it includes the costs of direct materials, direct labor, and manufacturing overhead that are included in the products that moved from the manufacturing area to the finished goods inventory during the accounting period. The calculation is presented as a schedule or statement.
Example of the Cost of Goods Manufactured
The formula and format for presenting the cost of goods manufactured is:
- The cost of the direct materials used
- PLUS the cost of the direct labor used
- PLUS the cost of manufacturing overhead assigned
- EQUALS = the manufacturing costs incurred in the current accounting period
- PLUS the cost of the beginning work-in-process inventory
- MINUS the cost of the ending work-in-process inventory
The cost of goods manufactured is similar to a retailer’s cost of goods purchased. Hence a manufacturer’s cost of goods sold is computed as:
- The cost of the beginning finished goods inventory
- PLUS the cost of the goods manufactured
- MINUS the cost of the ending finished goods inventory
The cost of goods manufactured is covered in detail in a cost accounting course. In addition, AccountingCoach PRO includes a form for preparing a schedule of the Cost of Goods Manufactured.
