How to Calculate Manufacturing Product Cost: Raw Materials, Direct Labor, and Factory Overhead

To calculate manufacturing product cost, combine direct materials, direct labor, and manufacturing overhead, such as factory electricity and production equipment depreciation. Adjust for changes in work-in-progress inventory to determine the cost of finished goods, then calculate unit cost using an appropriate costing method.

For example, if a completed production batch costs 50,000 and yields 1,000 good units, the average unit cost is 50. Monitor material waste and consumption variances, and distinguish manufacturing costs from selling and administrative expenses. Try Cash Cloud for free to explore inventory, purchasing, and accounting tools and verify production costing capabilities.