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    amandakd2003's Avatar
    amandakd2003 Posts: 1, Reputation: 1
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    #1

    Apr 14, 2008, 02:48 AM
    Cost of Goods Manufactured
    Hello,

    Can someone please help with the following three formulas?

    In managerial accounting, Schedule of Cost of Goods Manufactured:

    What is the formula for "direct labor"?
    What is the formula for "work in process"-beginning of the yr?
    What is the formula for "finished goods"-end of the yr?

    I am ever so grateful for the help!!
    yessedo's Avatar
    yessedo Posts: 5, Reputation: 1
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    #2

    Jun 8, 2008, 05:30 AM
    To find the "direct labour" you need to know the predetermined overhead rate.

    In order to find the predetermined overhead rate you also need to know what your allocation base is/will be.

    redetermined overhead rate = Estimated total manufacturing overhead rate
    Estimated total units in the allocation base
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #3

    Jun 8, 2008, 05:16 PM
    ? How is it that you need an overhead rate to figure out direct labor? More like needing direct labor to figure out overhead, assuming that is your cost driver. The only way this could be done is if the problem gives other information and wants you to work backwards into labor, and while problems seem to enjoy this "working backwards" concept, this one I've never seen. And that would be a huge assumption to be making.

    There is no "formula" to figure out any of these three items. How you figure them out depends upon what information has been given to you.

    Based on you mentioning a cost of goods manufactured report, I will answer the most likely scenarios. But this doesn't mean any of this will work, because I don't actually know what info you've been given. You're assuming some kind of set formulas exist for them.

    Direct labor would most likely be given. If not, next most likely is the number of hours worked and an hourly rate.

    WIP beginning of year -- that's an odd one to be missing to do a COGM report. Keep in mind that the end of one year is also the beginning of the next year. If it really isn't given, you'd have to probably work into it backwards. That is, make yourself a t account and list what you have. WIP includes materials, labor and overhead, so those are all added to the account. Cost of good manufactured comes out of the account. If a beginning balance were missing, you would have to have an ending balance so that you could work backwards. Another thought -- if it's a new company, there isn't any beginning balance.

    Ending balance finished goods -- beginning balance + good finished that comes from WIP - anything sold & moved to COGS = ending balance. Although I don't really call that a "formula." That is simply how you balance t accounts.

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