ECONOMICS

Detailed explanation-1: -Fortunately, you can use the work-in-process formula to determine an accurate estimate. It is: Beginning WIP Inventory + Manufacturing Costs – COGM = Ending WIP Inventory.

Detailed explanation-2: -If the finished goods inventory increases between the beginning and the end of a period, then the cost of goods manufactured is smaller than the cost of goods sold.

Detailed explanation-3: -The cost of inventory includes the cost of purchased merchandise, less discounts that are taken, plus any duties and transportation costs paid by the purchaser.

Detailed explanation-4: -To calculate total manufacturing cost you add together three different cost categories: the costs of direct materials, direct labour and manufacturing overheads. Expressed as a formula, that’s: Total manufacturing cost = Direct materials + Direct labour + Manufacturing overheads. That’s the simple version.