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Cost of Goods Manufactured Statement:

Definition and Explanation:

Cost of goods manufactured is the total cost of goods completed during the period.

Manufacturing companies transform raw material into finished goods through the use of labor and factory facilities. For example, a company manufacturing furniture from wood or timber. The income statement prepared by a manufacturing company requires the calculation of cost of goods manufactured. But merchandising companies need no calculation of cost of goods manufactured because they do not manufacture products but buy the products manufactured by some other company and resell them at a profit.

Usually cost of goods manufactured becomes part of the cost of goods sold statement. However, a separate schedule of cost of goods manufactured may also be prepared.

Formula:

Cost of goods manufactured (COGM) may also be expressed in the form of an equation. This equation is sometime referred to as COGM formula:

 Cost of goods manufactured = Direct materials used + Direct labor used + Factory overhead + Work in process opening inventory - Work in process closing inventory

Example:

Cost of Goods manufactured Statement
For the year ended December 31, 2005

 Direct Materials: ( Section 1) Materials inventory, January 1, 2005 1572400 Purchases 8420000 Less purchases returns and allowances 42,000 8378000 Materials available for use 9950400 Less materials inventory, December 31, 2005 1270600 Direct materials consumed 8679800 Direct labor ( Section 2) 7346400 Factory overhead: ( Section 3) Indirect labor 1329300 Salaries 972000 Payroll taxes 489000 Power 112000 Heat 69200 Light 44300 Factory supplies 50000 Depreciation - factory building 68300 Depreciation - machinery 403000 Repairs and maintenance 145800 Patent amortization 33200 Tools and dies used 178600 Insurance on building and machinery 21200 3915900 Total manufacturing cost 19942100 Add work in process inventory, January 1 2005. ( Section 4) 2338000 Total cost to be accounted for 22280100 Less work in process inventory, December 31 2005. 1303200 Cost of goods manufactured 20976900

Relevant Articles:

 » Income statement » Cost of Goods Sold Statement » Cost of Goods Manufactured Statement » Balance Sheet - Report Form » Difference between Income Statement and Trading and Profit and Loss Account » Adjustments and their Effect on Financial Statements » Evaluation of Financial Statements

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