Cost of Goods Manufactured (COGM) is the total production cost of goods completed during an accounting period. It includes direct materials, direct labor, and manufacturing overhead.
To calculate direct material costs:
\[ \text{Direct Materials} = (\text{Beginning Raw Materials Inventory} + \text{Purchases of Raw Materials}) \\ - \text{Ending Raw Materials Inventory} \]
To calculate total manufacturing costs:
\[ \text{Total Manufacturing Costs} = \text{Direct Materials} + \text{Direct Labor} \\ + \text{Manufacturing Overhead} \]
To calculate Cost of Goods Manufactured (COGM):
\[ \text{COGM} = (\text{Beginning WIP Inventory} + \text{Total Manufacturing Costs}) \\ - \text{Ending WIP Inventory} \]
Suppose a manufacturing company has the following financial data for a specific accounting period:
Step 1: Calculate direct material costs:
\[ \text{Direct Materials} = (\$8,000 + \$30,000) - \$6,000 = \$32,000 \]
Step 2: Calculate total manufacturing costs:
\[ \text{Total Manufacturing Costs} = \$32,000 + \$20,000 + \$12,000 = \$64,000 \]
Step 3: Calculate COGM:
\[ \text{COGM} = \$3,000 + \$64,000 - \$4,500 = \$62,500 \]
