The following formulas are useful in cost accounting to determine different types of costs.
Prime cost = Direct materials consumed + Direct labor
Conversion cost = Direct materials + Factory overhead
Factory cost = Direct materials + Direct labor + Factory overhead
Cost of goods manufactured = Direct materials consumed + Direct labor + Factory overhead + Opening work-in-progress (WIP)- Closing WIP
Cost of goods sold = Direct materials consumed + Direct labor + Factory overhead + Opening WIP – Closing WIP + Opening finished goods – Closing finished goods