Table of Contents
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) |
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………. ………. ………. ………. ………. ………. ……… ……… ……… ……… ……… ……… ……… |
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 : Golden Rules Of Accounting