Developing an Effective Schedule of Cost of Goods Manufactured- A Comprehensive Guide

How to Prepare Schedule of Cost of Goods Manufactured

The preparation of the Schedule of Cost of Goods Manufactured is a critical step in understanding the financial health of a manufacturing company. This schedule provides a detailed breakdown of the costs associated with producing goods, from the beginning of the production process to the completion of the goods. By accurately preparing this schedule, companies can make informed decisions regarding pricing, production levels, and cost control. In this article, we will discuss the key steps and considerations involved in preparing the Schedule of Cost of Goods Manufactured.

1. Gather the necessary data

To begin preparing the Schedule of Cost of Goods Manufactured, you will need to gather the following data:

– Raw materials purchased: This includes the quantity and cost of raw materials purchased during the period.
– Direct labor costs: This includes the wages paid to workers directly involved in the production process.
– Manufacturing overhead: This includes all indirect costs associated with production, such as factory rent, utilities, and depreciation.
– Work in process inventory: This represents the value of partially completed goods at the beginning and end of the period.
– Finished goods inventory: This represents the value of completed goods at the beginning and end of the period.

2. Calculate the total manufacturing costs

Once you have gathered the necessary data, you can calculate the total manufacturing costs by adding the following:

– Raw materials purchased
– Direct labor costs
– Manufacturing overhead

3. Determine the cost of goods manufactured

To determine the cost of goods manufactured, you need to consider the following:

– Add the beginning work in process inventory to the total manufacturing costs.
– Subtract the ending work in process inventory from the total.

The resulting figure represents the cost of goods manufactured during the period.

4. Calculate the cost of goods sold

To calculate the cost of goods sold, you need to add the beginning finished goods inventory to the cost of goods manufactured and then subtract the ending finished goods inventory. This figure represents the cost of the goods that were sold during the period.

5. Review and analyze the schedule

Once you have prepared the Schedule of Cost of Goods Manufactured, it is important to review and analyze the data. Look for trends, such as increasing or decreasing costs, and identify any areas where you can improve efficiency or reduce costs. This analysis can help you make informed decisions regarding production, pricing, and cost control.

In conclusion, preparing the Schedule of Cost of Goods Manufactured involves gathering necessary data, calculating total manufacturing costs, determining the cost of goods manufactured and sold, and reviewing the schedule for insights. By following these steps, you can ensure that your company has a clear understanding of its production costs and can make informed decisions to improve profitability.