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How to calculate work in progress cost

what is a cost calculation

Cost calculation means not only calculating the total cost of the goods ,it also finding the cost of each department of the company and its cost at each stage of the goods

cost calculation rule of account

Only expenses and income related to the company is goods and services should be recorded in the cost account .

The cost calculation method will vary depending on the items

  • The simple cost sheet method can be used for products that end in a process

  • The process cost method can be used for products that end in multiple process (Milk products )

  • Each process must cross three stages ,At each of these stages the cost of the goods must be calculate

The calculation method is two types

  • Calculating the cost of goods at each stage
  • Calculating the cost of goods at stages between stage

example of one process

example of two process

Calculating the cost of goods at each stage

Transaction Details Of The Chair Manufacturer Company ..... .....

  Direct cost

Direct cost for each stage of the chair manufacturing company
Raw in progress .finished goods
transport charges10.electric charges20.electric charges20
labour charges 60.labour charges90.labour charges100
Raw Material (unit $200)1000.Cutting Machine Charges20.cutting & fitting expenses60

  Indirect cost

Indirect costs of chair manufacturing company
Factory Overhead 40% on Labour. Office & Admin Overhead 10% on Work Cost.
Factory Supervisor60.OfficeFurnitureDepreciation20.
Factory Insurance 5. Salary70.
Factory Electric Charge15.Telephone And Postage5.
Maintenance Charges20.Offices Maintain10.

month stock usege

The direct cost of each stage can be easily calculated but the indirect cost can not be calculated because the indirect cost is the cost of the total Each stage is divided based on the indirect cost percentage % to calculate the cost of the goods

If the cost of each sector cannot be calculated from the total cost it can be calculated based on the percentage

Example of indirect cost

Most of the costs incurred for the factory depend on the direct labour so the factory cost can be calculated on the basis of direct labour

  • Factory Electric Power ,stationery ,Insurance,It is not easy to figure out how much these types of costs have cost each sector so it is a good calculation method to calculate based on direct labor

you know that management is related to every activity of the company so it is a good practice to calculate the administrative costs from the Gross work cost

indrect cost

fatctory cost: The total direct labour must first be calculated $250 and factory cost $100 calculate (100 *100/250 = 40)

40% of the direct labour is factory cost

administrative cost total direct cost (d labour $250, d exp $130 +d metertrial consumed $800 - scrap $ 250) + fector cost $100 = work cost $1030 ,administrative cost $103 (103*100/1030=10)

10% of the gross work cost is administrative cost

Calculating the cost of goods at each stage
ParticualrPurchased Raw Materialsclosing MaterialsMaterials consumedscrap vaueMaterials cost direct labourdirect exp prime cost Factory Overhead 40% of labour Factory & work costW I P openingW I P closingOffice & Admin Overhead 10% of work cost Cost Of Goods Productionunit
raw material cost (708)1000(-)200800250550 601062024644-64.4708.4
WIP cost (30unit.cost..$891) per unit cost $29.7----- 904013036166--16.6182.6
finished goods cost----- 1008018040220--22242
total cost 160 unit $836 per unit cost $5.2251000(-)200800(-)250550 2501309301001030(-)297103836160

Calculating the cost of goods at each stages between the stage

how to calculate loss and WIP on 70% or 40% .....?

example of direct cost

The production for a week in the "H" department is 30 and the Direct cost is $ 57 But the output is 25 units and the remaining 5 units are 70% percent complete and the Direct cost is $ 57

Direct costs should also be calculated on a Percentage basis if the actual output is different from the expected output

Expected production is 30 units and direct cost is $ 57 But in reality the output is 25 units and the remaining 5 units are 70% work in progress

Calculate the unfinished units based on the percentage ( The same method can be calculated if the products are damaged or loss during production

  • point 1 Unfinished unit should be calculated on a percentage basis 70% (5 *70/100= 3.5)
  • point 2 The total unit must be calculated (25+3.5 )28.5 (57/28.5 =2)
  • point 3 labour cost for unfinished unit 3.5 * 2 = 7 and labour cost for finished unit 25 *2 = 50
  • Calculating in percentage terms is not an accurate calculation method but it does not cause any error in the calculation

    160 units were cut to carry the materials in the second stage to the third stage but only 150 units were fitted and The remaining 10 units are 90 percent complete


    If you do not calculate the cost of the goods at each stage you have to calculate from the total cost

    labour cost calculation-makingaccount

    If you are calculating the cost of goods at each stage you only need to calculate the cost of the place where the unfinished goods

  • point 1 Unfinished unit should be calculated on a percentage basis 90% (10 *90/100= 9) total unit 159
  • labour cost-makingaccount

    indirect cost

    d material cost39
    d labour cost5.7
    d expenses cost5
    fectory & admin over head3.5
    total working progrss of
    10 unit 90% cost
    cost sheet
    particular AmountAmount
    purchased raw materials 1000
    closing raw material 200
    raw material consumed 800
    scrao value (-)250
    direct material 550
    direct expenses 130
    direct labour 250

    prime cost


    factory overhead (40% of labour)

    (+) opening W I P -

    (-) closing W I P


    closing W I P (+)297
    closing W I P 90%(+)53

    factory & work cost


    office & admin overhead (43% of work cost)


    cost of goods production
    150 chairs



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