FORMULAS ACCOUNTING
COST OF GOODS SOLD
STEP 1
BEGINNING MATERIALS INVENTORY
+ MATERIALS PURCHASED DURING PERIOD
-ENDING MATERIALS INVENTORY
=COST OF MATERIALS USED
STEP 2
DIRECT MATERIALS COST ( =COST OF MATERIALS USED)
+ DIRECT LABOR COSTS
+ MANUFACTURING OVERHEAD COSTS
= TOTAL MANUFACTURING COSTS
STEP 3
BEGINNING WORK-IN-PROGRESS
+ TOTAL MANUFACTURING COSTS
-ENDING WORK-IN-PROGRESS
= COSTS OF GOODS MANUFACTURED
STEP 4
BEGINNING FINISHED GOODS INVENTORY
+ COSTS OF GOODS MANUFACTURED
= COSTS OF GOODS AVAILABLE FOR SALE
-ENDING FINISHED GOODS INVENTORY
= COSTS OF GOODS SOLD
STEP 5
SALES REVENUE
-COGS
=GROSS PROFIT
-OPERATING EXPENSES
=OPERATING INCOME
COST OF GOODS SOLD
STEP 1
BEGINNING MATERIALS INVENTORY
+ MATERIALS PURCHASED DURING PERIOD
-ENDING MATERIALS INVENTORY
=COST OF MATERIALS USED
STEP 2
DIRECT MATERIALS COST ( =COST OF MATERIALS USED)
+ DIRECT LABOR COSTS
+ MANUFACTURING OVERHEAD COSTS
= TOTAL MANUFACTURING COSTS
STEP 3
BEGINNING WORK-IN-PROGRESS
+ TOTAL MANUFACTURING COSTS
-ENDING WORK-IN-PROGRESS
= COSTS OF GOODS MANUFACTURED
STEP 4
BEGINNING FINISHED GOODS INVENTORY
+ COSTS OF GOODS MANUFACTURED
= COSTS OF GOODS AVAILABLE FOR SALE
-ENDING FINISHED GOODS INVENTORY
= COSTS OF GOODS SOLD
STEP 5
SALES REVENUE
-COGS
=GROSS PROFIT
-OPERATING EXPENSES
=OPERATING INCOME
