gen-define-the-cost-of-goods-sold-in-production-and-give-one-sho-a4ef

Define the cost of goods sold in production and give one short worked example.

# Cost of Goods Sold (COGS) in Production **Definition:** Cost of Goods Sold is the direct cost of producing the goods that a company has sold during a specific period. It includes the costs of materials, direct labor, and manufacturing overhead directly attributable to the finished products sold. ## Formula: ``` COGS = Beginning Inventory + Production Costs - Ending Inventory ``` --- ## Worked Example: **ABC Manufacturing produces furniture:** - Beginning inventory (Jan 1): $20,000 - Production costs during January: - Direct materials: $50,000 - Direct labor: $30,000 - Manufacturing overhead: $20,000 - Ending inventory (Jan 31): $25,000 **Calculation:** COGS = $20,000 + ($50,000 + $30,000 + $20,000) - $25,000 COGS = $20,000 + $100,000 - $25,000 **COGS = $95,000** This means ABC Manufacturing spent $95,000 to produce the furniture that was actually sold in January. The remaining $25,000 in inventory represents products manufactured but not yet sold.