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

Frequently Asked Questions

What is the formula for prime cost?

Prime cost = direct materials consumed + direct labor

What is the formula for conversion cost?

Conversion cost = direct materials + factory overhead

What is the formula for factory cost?

Factory cost = direct materials + direct labor + factory overhead

What is the formula for cost of goods manufactured?

Cost of goods manufactured = direct materials consumed + direct labor + factory overhead + opening work-in-progress (wip)- closing wip

What is the formula for cost of goods sold?

Cost of goods sold = direct materials consumed + direct labor + factory overhead + opening wip – closing wip + opening finished goods – closing finished goods

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