The schedule of cost of goods manufactured is a way of calculating the costs spent by a company on production. It is commonly used in accounting as a measure of the total cost of goods produced during a particular period.
Explanation:
Cost of goods manufactured statement is an important element in managerial accounting because it enables calculating the expenditures of an organization of the production of goods. The companies prepare a schedule of cost of goods manufactured to analyze how much resources are spent on the manufacturing of the final products during an accounting period.
Many industrial entities use raw materials to produce finished goods. During the process of manufacturing, the company uses an array of technologies and equipment, as well as human force, that impacts the costs of goods manufactured.
Therefore, the schedule of cost of goods manufactured formula requires to add starting work in progress inventory to the total manufacturing costs and subtracting the ending work in process inventory from that sum.
In the result, the cost of goods manufactured will illustrate the sum of money spent on the production of finished goods. The calculations are usually made within a certain period of time that is defined by the accomplished production process.
The calculation of the schedule of cost of goods manufactured is significant because it is a basic constituent in the following accounting processes of a manufacturing entity. The data retrieved from the cost of goods manufactured statement will be used in the consecutive estimation of cost of goods sold. These elements are essential for the analysis of a company’s income.