ACCTG404

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Lesson 1: Course Orientation and Defining Managerial Accounting

Step 1: Cost of Materials Placed into Production

The first step in determining COGS for a manufacturing company is to establish the cost of materials placed into production. This is the amount of materials the company takes from materials inventory and puts into production. The formula to calculate this is shown in Formula 1.1.

**Formula 1.1. Cost of Materials Placed into Production**

Guided Example

For your example, determining cost of materials placed into production would look like this:

**Figure 1.4. Example Cost of Materials Placed into Production**
	Beginning Materials Inventory	$ 450,000
+	Purchases	+ $ 750,000
-	Ending Materials Inventory	- $ 420,000
Cost of Goods Placed into Production		$ 780,000