cost of goods manufactured

Cost of goods manufactured

Cost of goods manufactured-

Cost of goods manufactured (COGM) is a managerial accounting term that is used to show total cost of manufacturing products  and completed by the company during an accounting period.

Cost of Goods Manufactured includes are raw material consumed, direct labor, direct expenses, factory overhead ,opening stock of work-in-progress(WIP) ,and deducted closing stock of work-in- progress (WIP). 

Other words –The total cost incurred in manufacturing products is called the cost of goods manufactured. If opening stock or Inventory of work-in-progress(WIP) is added to the sum of raw material consumed, direct labor, direct expenses, factory overhead and closing stock or Inventory of work-in- progress (WIP) is deducted, during an accounting period,then the total cost will be called Cost of Goods manufactured.

Cost of goods manufactured (COGM) Formula-

Cost of goods manufactured (COGM) = Raw Material Consumed+Direct Labour+ Direct Expenses + Factory Overheads+ Opening stock or Inventory of work in progress(WIP) or Beginning WIP Inventory – Closing Stock or Inventory of work in progress(WIP) or Ending WIP Inventory

Raw Material Consumed=Opening stock or Inventory of Raw Material  + Purchase of Raw Material  – Closing Stock or Inventory of Raw Material 

Cost of goods manufactured (COGM) Statement

Particulars Amount
 

Opening stock of Raw Material or Beginning raw material Inventory

Add: Purchase of Raw Material

Raw Material available for use

Less: Closing Stock of Raw Material or Ending raw material Inventory

Raw Material Consumed

Add : Direct Labour

Direct Expenses

Prime Cost

Add: Factory Overheads

Manufacturing Cost

Add: Opening stock of work-in-progress(WIP) or Beginning WIP Inventory

Total Work- In- Progress

 Less: Closing Stock of work-in-progress(WIP) or Ending WIP Inventory

Cost of goods manufactured (COGM)

……….

……….

……….

……….

……….

……….

……….

………

………

………

………

………

………

………

1.Example-

COGM From the following information –

Raw Material consumed 3,00,000

Direct Labour 80,000

Direct Expenses 1,20,000

Factory Overheads 1,50,000

Opening stock of work-in-progress(WIP)  or Beginning WIP Inventory 80,000

 Closing Stock of work-in-progress(WIP)  or Ending WIP Inventory 60,000

Solution-

Cost of goods manufactured (COGM)= Raw Material Consumed+Direct Labour+ Direct Expenses + Factory Overheads+ Opening stock of work in progress(WIP) – Closing Stock of work  in progress(WIP)

= 3,00,000+80,000+ 1,20,000 + 1,50,000+ 80,000 – 60,000

= 6,70,000

2.Example-

COGM From the following information –

Opening stock of Raw Material  2,00,000

Purchase of Raw Material  5,00,000

Closing Stock of Raw Material 1,00,000

Direct Labour 1,80,000

Direct Expenses 1,20,000

Factory Overheads 1,50,000

Opening stock of work-in-progress(WIP) or Beginning WIP Inventory 90,000

 Closing Stock of work-in-progress(WIP) or Ending WIP Inventory 40,000

Solution-

Raw Material Consumed=Opening stock of Raw Material  + Purchase of Raw Material  – Closing Stock of Raw Material 

Raw Material Consumed=2,00,000 + 5,00,000 – 1,00,000

= 6,00,000

Cost of goods manufactured (COGM)= Raw Material Consumed+Direct Labour+ Direct Expenses + Factory Overheads+ Opening stock of work in progress(WIP) – Closing Stock of work  in progress(WIP)

= 6,00,000+1,80,000+ 1,20,000 + 1,50,000+ 90,000 – 40,000

= 11,00,000

3.Example-

COGM  From the following information –

Opening stock of Raw Material  2,50,000

Purchase of Raw Material  4,50,000

Closing Stock of Raw Material 1,50,000

Direct Labour 1,30,000

Direct Expenses 1,20,000

Factory Overheads 1,60,000

Opening stock of work-in-progress(WIP)  or Beginning WIP Inventory 95,000

 Closing Stock of work-in-progress(WIP)  or Ending WIP Inventory 45,000

Statement of Cost of goods manufactured (COGM)

Particulars Amount
 

Opening stock of Raw Material

Add: Purchase of Raw Material

Raw Material available for use

Less: Closing Stock of Raw Material

Raw Material Consumed

Add : Direct Labour

Direct Expenses

Prime Cost

Add: Factory Overheads

Manufacturing Cost

Add: Opening stock of work-in-progress  or Beginning WIP Inventory

Total Work In Progress

 Less: Closing Stock of work-in-progress  or Ending WIP Inventory

Cost of goods manufactured (COGM)

2,50,000

4,50,000

7,00,000

(1,50,000)

5,50,000

1,30,000

1,20,000

8,00,000

1,60,000

9,60,000

95,000

10,55,000

(45,000)

10,10,000

Work in progress?

Work in progress is the cost of unfinished goods in the manufacturing process. Or Work in progress (WIP) refers to partially-completed goods that are still in the production process.

Work in Progress is the value of inventory, labour, expenses and overhead of work that is in progress and has not been completed.

“A material which is neither a raw material nor a finished product during the manufacturing process is called work in progress”.

Raw materials?

Raw materials are the inputs or resources or basic material that a company uses to manufacture its finished products .

Raw material means such material which is used directly for the production of the product and is the main part of the manufactured Product. For example, wood to make a table,  jute for making cloth,  iron for making machine, Sugarcane etc. are direct ingredients for making sugar.

Also read : Cost Sheet Format

Also read : P/V Ratio Formula

Also read : Golden Rules Of Accounting

 

 

 

 

 

 

Leave a Comment

error: Alert: Content is protected !!