Step-by-Step Guide to Crafting a Comprehensive Cost of Goods Manufactured Schedule

How to Prepare a Cost of Goods Manufactured Schedule

Preparing a cost of goods manufactured (COGM) schedule is a crucial 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 raw materials to the finished product. By accurately calculating the COGM, businesses can make informed decisions about pricing, inventory management, and overall profitability. In this article, we will guide you through the process of preparing a COGM schedule, ensuring that you have a clear understanding of each component and how to calculate them.

Step 1: Gather the Necessary Data

Before you can begin preparing the COGM schedule, you need to gather the necessary data. This includes information on the opening and closing inventory of raw materials, work in process (WIP), and finished goods. Additionally, you will need data on the direct materials, direct labor, and manufacturing overhead costs incurred during the accounting period.

Step 2: Calculate the Direct Materials Used

The first component of the COGM schedule is the direct materials used. To calculate this, you need to add the opening inventory of raw materials to the direct materials purchased during the period, then subtract the closing inventory of raw materials. This will give you the total direct materials used in production.

Step 3: Calculate the Direct Labor Costs

Next, you need to calculate the direct labor costs. This includes the wages paid to employees directly involved in the manufacturing process. To determine the total direct labor costs, you will need to add the direct labor costs incurred during the period to the opening WIP.

Step 4: Calculate the Manufacturing Overhead Costs

Manufacturing overhead costs include indirect costs associated with the production process, such as rent, utilities, and depreciation. To calculate the manufacturing overhead costs, you need to add the opening WIP to the manufacturing overhead costs incurred during the period, then subtract the closing WIP.

Step 5: Calculate the Total Manufacturing Costs

Now that you have calculated the direct materials used, direct labor costs, and manufacturing overhead costs, you can add them together to find the total manufacturing costs. This represents the total cost of producing the goods during the accounting period.

Step 6: Calculate the Cost of Goods Manufactured

The final step in preparing the COGM schedule is to calculate the cost of goods manufactured. To do this, you need to add the opening WIP to the total manufacturing costs, then subtract the closing WIP. This will give you the cost of goods manufactured during the accounting period.

Step 7: Review and Analyze the COGM Schedule

Once you have prepared the COGM schedule, it’s essential to review and analyze the data. Look for trends, such as increasing or decreasing costs, and investigate the reasons behind these changes. This analysis can help you identify areas for improvement and make informed decisions to optimize your manufacturing process.

In conclusion, preparing a cost of goods manufactured schedule is a vital process for any manufacturing company. By following these steps and carefully analyzing the data, you can gain valuable insights into your production costs and make informed decisions to improve your business’s financial performance.