ECONOMICS

Detailed explanation-1: -COGS = Beginning Finished Goods Inventory + Cost of Goods Manufactured – Ending Finished Goods Inventory. Delving into the calculation in a bit more detail, we can see that the COGS equation includes all three basic inventory types – the raw materials, WIP, and finished goods inventories.

Detailed explanation-2: -Cost per unit = (Electricity + Rent + Labor + Raw materials) / Number of units.

Detailed explanation-3: -It consists of three main expenses: raw materials, direct labor, and overhead. These costs may be fixed (most overhead) or variable (raw materials and labor). The total product cost formula is Total Product Cost = Cost of Raw Materials + Cost of Direct Labor + Cost of Overhead.

Detailed explanation-4: -In calculating gross profit for a manufacturing company, the cost of goods manufactured is deducted from net sales. When the physical association of raw materials with the finished product is too small to trace in terms of cost, they are usually classified as indirect materials.