Determining the Cost of Goods Manufactured

Determining the Cost of Goods Manufactured - is the total...

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Determining the Cost of Goods Manufactured An example may help show how companies determine the cost of goods manufactured. Assume that  on January 1  Dell  has a number of computers in various stages of production. In total, these partially  completed units are called  beginning work in process inventory . The costs the company assigns to  beginning work in process inventory are based on the  manufacturing costs incurred in the prior  period . Dell first uses the manufacturing costs incurred in the current year to complete the work that was in  process on January 1. It then incurs manufacturing costs for production of new orders. The sum of  the direct materials costs, direct labor costs, and manufacturing overhead incurred in the current year 
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Unformatted text preview: is the total manufacturing costs for the current period. We now have two cost amounts: (1) the cost of the beginning work in process and (2) the total manufacturing costs for the current period. The sum of these costs is the total cost of work in process for the year. At the end of the year, Dell may have some computers that are only partially completed. The costs of these units become the cost of the ending work in process inventory . To find the cost of goods manufactured , we subtract this cost from the total cost of work in process. Illustration 14-7 shows the formula for determining the cost of goods manufactured. Illustration 14-7 Cost of goods manufactured formula...
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Determining the Cost of Goods Manufactured - is the total...

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