Cost of good sold

Cost of goods sold (COGS) refers to the inventory costs of those goods a business has sold during a particular period. Costs are associated with particular goods using one of several formulas, including specific identification, first-in first-out (FIFO), or average cost. Costs include all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Costs of goods made by the business include material, labor, and allocated overhead. The costs of those goods not yet sold are deferred as costs of inventory until the inventory is sold or written down in value.

Cost of Goods Manufactured and Sold Statement Formulas:

Prime Cost = Direct Materials Cost + Direct Labor Cost

Total Factory Cost  or Manufacturing Cost = Direct Materials + Direct Labor Cost + Factory Overhead

Conversion Cost = Direct Labor Cost + Factory Overhead Cost

Cost of Goods Manufactured (COGM) = Total Factory Cost + Opening Work in Process Inventory - Ending Work in Process Inventory

Or

Cost of Goods manufactured = Direct materials cost + Direct labor cost + Factory overhead cost + Opening work in process inventory - Ending work in process inventory

Cost of goods sold (COGS) = Cost of goods manufactured + Opening finished goods inventory - Ending finished goods inventory

Or

Cost of goods sold = Direct materials cost + Direct labor cost + Factory overhead cost + Opening work in process inventory - Ending work in process inventory + Opening finished goods inventory - Ending finished goods inventory

Number of units manufactured = Units sold + Ending Finished Goods units - Opening finished goods units

Per unit cost of goods manufactured = Cost of goods manufactured / Units manufactured

Materials used or consumed = Opening inventory or materials + Net purchases of materials - Ending inventory of materials

Income statement formulas:

Gross profit = Net sales - Cost of goods sold

Operating profit = Gross profit - Operating expenses

Operating or commercial expenses = Selling or marketing expenses + General or administrative expenses

Per unit gross profit = Gross profit / No. of units sold

Per unit net profit = Net profit / No. of units sold

Percentage of GP to sales = (Gross profit / Net sales) × 100

Percentage of net profit to sales = (Net profit / Net sales) × 100