Accounting
ERP
Manufacturing
Cost of Goods Manufactured Schedule: Formula, Template and How ERP Produces It
Last updated: October 11, 2026 · Independent guide · We do not sell rankings or coverage.
A cost of goods manufactured schedule shows the total cost of the products your plant finished during a period. It starts with direct materials used, adds direct labor and applied manufacturing overhead to get total manufacturing costs, and then adjusts for the change in work in process. The result, cost of goods manufactured (COGM), is the amount that moves from work in process into finished goods, and it feeds the cost of goods sold figure on your income statement.
How to use this template
Copy the table below into a spreadsheet with one amount column per month. Each line has a letter so the formulas are easy to follow, and the third column shows where the figure comes from in your ledger or ERP. The amounts are an illustration for a fictional component maker. Replace them with your balances and keep the tie-out checks below the table.
Cost of goods manufactured schedule template
| Line | Item and formula | Where the figure comes from | Illustration (USD) |
|---|---|---|---|
| A | Beginning raw materials inventory | Prior month’s closing balance | 42,000 |
| B | Add: raw materials purchases (net of returns, including freight-in) | Receipts debited to raw materials | 186,000 |
| C | Raw materials available (A + B) | Calculated | 228,000 |
| D | Less: ending raw materials inventory | Count or valuation report | (38,500) |
| E | Raw materials used (C − D) | Calculated | 189,500 |
| F | Less: indirect materials issued to overhead | Supplies charged to overhead | (6,500) |
| G | Direct materials used (E − F) | Material consumption posted to WIP | 183,000 |
| H | Direct labor | Labor cost posted to WIP | 96,000 |
| I | Applied manufacturing overhead (predetermined rate × allocation base) | Credits to the overhead applied account | 144,000 |
| J | Total manufacturing costs (G + H + I) | Total debits to WIP | 423,000 |
| K | Add: beginning work in process | Prior month’s closing balance | 31,000 |
| L | Total cost of work in process (J + K) | Calculated | 454,000 |
| M | Less: ending work in process | WIP account balance at period end | (27,500) |
| N | Cost of goods manufactured (L − M) | Output credited out of WIP | 426,500 |
| O | Add: beginning finished goods | Prior month’s closing balance | 58,000 |
| P | Goods available for sale (N + O) | Calculated | 484,500 |
| Q | Less: ending finished goods | Finished goods account at period end | (61,200) |
| R | Unadjusted cost of goods sold (P − Q) | COGS posted from shipments | 423,300 |
| S | Actual manufacturing overhead incurred | Factory overhead expense accounts | 147,800 |
| T | Underapplied (overapplied) overhead (S − I) | Positive means underapplied | 3,800 |
| U | Adjusted cost of goods sold (R + T) | Income statement COGS | 427,100 |
Two tie-out checks follow. Line J minus line N must equal the change in WIP (423,000 − 426,500 = 27,500 − 31,000 = −3,500). Lines A, D, K, M, O and Q must each match the general ledger to the dollar. If either check fails, an entry is missing, duplicated or misposted.
Walking through each part of the schedule
Direct materials used (lines A to G)
Raw materials used is beginning raw materials plus purchases minus ending raw materials (AccountingTools, July 13, 2026). Many plants keep fasteners and cleaning supplies in the same account, so line F moves indirect materials to overhead. If your system posts consumption to WIP, line G should match the material debits to WIP for the month.
Direct labor (line H)
Use labor charged to production orders or jobs, not total factory payroll. Supervisors, material handlers and maintenance staff are indirect labor and belong in actual overhead on line S.
Applied overhead (line I)
In the illustration, budgeted overhead of $1,728,000 divided by budgeted direct labor of $1,152,000 gives a predetermined rate of 150% of direct labor, so $96,000 of labor carries $144,000 of overhead. The schedule uses applied overhead because that is the amount charged into WIP.
Under US GAAP, fixed production overhead is allocated to inventory based on the normal capacity of your facilities, and abnormal idle facility expense, freight, handling and spoilage are charged to the current period. These rules came from FASB Statement No. 151, which amended ARB No. 43, chapter 4 (Journal of Accountancy, February 1, 2005). Under ASC 330, fixed overhead left unabsorbed because output fell below normal capacity is a period expense (Wiss, May 6, 2026; Wiss is an accounting firm that sells advisory services).
Change in work in process (lines K to N)
Adding beginning WIP and subtracting ending WIP converts the costs you put into production into the cost of units you finished. In an ERP, ending WIP is the open balance on released orders. Without one, count partly built units and cost them at materials to date plus labor and overhead for completed operations.
From COGM to COGS (lines O to R)
COGM is the transfer from WIP to finished goods. Beginning finished goods plus COGM minus ending finished goods gives cost of goods sold, which is subtracted from sales to reach gross margin (AccountingTools, July 13, 2026).
Over- or underapplied overhead (lines S to U)
When actual overhead exceeds applied overhead, overhead is underapplied; when applied exceeds actual, it is overapplied. OpenStax shows the common treatment of closing the balance to cost of goods sold, and notes that larger variances, or larger companies, may allocate it among WIP, finished goods and COGS instead (OpenStax, book published February 14, 2019).
| Account | Debit | Credit | Note (illustration) |
|---|---|---|---|
| Cost of goods sold | 3,800 | Closes underapplied overhead | |
| Manufacturing overhead | 3,800 | Brings the account to zero |
To allocate instead, use the applied overhead in each balance. If 5% of this month’s applied overhead sits in ending WIP, 10% in ending finished goods and 85% in units sold, the $3,800 goes $190 to WIP, $380 to finished goods and $3,230 to COGS. Use the same method every month.
Where the same figures come from in Business Central, NetSuite and Acumatica
An ERP produces each line from production postings. For how costing methods change them, see our guide to standard cost vs actual cost.
| Schedule line | Business Central | NetSuite | Acumatica |
|---|---|---|---|
| Raw materials and finished goods | Inventory Valuation report | Inventory asset accounts; Inventory Valuation Detail report | Inventory GL accounts |
| Materials, labor and overhead into WIP | Production Order – WIP report: Consumption and Capacity | Work order issues and completions posting to WIP | Work in Process report: WIP Total |
| COGM | Output column | Completions credited out of WIP | Mfg to Inventory column |
| Overhead and order variances | Overhead Applied account; overhead variance accounts | Work order close variances | WIP Variance account on order close |
Microsoft Dynamics 365 Business Central. Microsoft lists WIP as increased by material consumption, capacity consumption and manufacturing overhead, and decreased by output of end items, which it labels cost of goods manufactured (Microsoft Learn, July 1, 2025). The Production Order – WIP report (report 5802) shows consumption, capacity and output for released orders (Microsoft Learn, March 10, 2026). Work center unit cost equals direct unit cost plus direct unit cost times Indirect Cost % plus Overhead Rate (Microsoft Learn, July 15, 2026). Run Adjust Cost – Item Entries and Post Inventory Cost to G/L before pulling figures, then check the Inventory – G/L Reconciliation page (Microsoft Learn, August 29, 2024).
Oracle NetSuite. On a WIP work order, consumption debits component WIP, completion credits assembly WIP and debits inventory, and work order close posts variances (NetSuite Help, no date shown). Labor, machine and overhead rates come from manufacturing cost templates, which list the rates recorded each time an operation step is completed (NetSuite Help, no date shown). The shop floor reports track status and quantities, not WIP value, so take beginning and ending WIP from the WIP asset accounts on the trial balance (NetSuite Help, no date shown).
Acumatica. The Work in Process report (AM654000) shows WIP Total, Mfg to Inventory and WIP Balance by WIP account, but it has no period or date parameter, so it shows current balances rather than a month-end snapshot (MYOB Acumatica Help, no date shown). Run it on the first business day after month end or use the WIP account’s GL activity. Closing a production order zeroes its WIP and posts any difference to the WIP Variance account (MYOB Acumatica Help, no date shown). For a wider comparison, see NetSuite vs Acumatica.
Common mistakes
- Using actual overhead on line I. WIP will not reconcile; handle the difference on lines S to U.
- Leaving indirect materials in direct materials. This double counts supplies your overhead rate already covers.
- Including selling or administrative costs. Commissions, outbound freight and office rent are period costs.
- Pulling balances before cost adjustment runs. The schedule will not match the closed ledger.
- Capitalizing abnormal costs. Unabsorbed fixed overhead from a shutdown goes to expense.
When to move from a spreadsheet to software
A spreadsheet works while you run a handful of jobs. Once WIP spans dozens of open orders or overhead rates differ by work center, an ERP that posts consumption, labor and output to WIP as they happen produces most lines for you. Business Central, NetSuite and Acumatica all do this, but none of the documentation we reviewed shows a report laid out as a classic COGM schedule, so expect to build one financial report and reuse it. Our guide to ERP for financial close covers the wider month end.
How we researched this
We reviewed the pages ranking for this term, including AccountingTools, SuperfastCPA and vendor blogs from Cleverence and Beancount.io. None pairs an editable template with tie-outs and a map to ERP reports. We checked the accounting against OpenStax, the Journal of Accountancy and Wiss, and each software claim against vendor documentation. Acumatica’s own help site blocked automated retrieval, so we used MYOB’s help for MYOB Acumatica; confirm form names in your version.
Related guides
- COGS Journal Entry: Perpetual vs Periodic, With Examples
- Inventory Costing Methods: FIFO, Average, Standard, Specific
- LIFO Reserve: Calculation, Journal Entry and Disclosure
Frequently asked questions
What is the formula for cost of goods manufactured?
Cost of goods manufactured equals direct materials used plus direct labor plus applied overhead, plus beginning work in process, minus ending work in process. Direct materials used is beginning raw materials plus purchases minus ending raw materials, less indirect materials.
What is the difference between COGM and COGS?
COGM is the cost of units finished during the period. COGS is the cost of units sold: beginning finished goods plus COGM minus ending finished goods. They differ whenever finished goods inventory changes.
Does the COGM schedule use actual or applied overhead?
It uses applied overhead, because that is what was charged into work in process. The gap to actual overhead is closed separately, usually to cost of goods sold.
Is a cost of goods manufactured schedule required in financial statements?
No. It is a supporting schedule used to compile the financial statements; the statements report inventory and cost of goods sold.
Where do I find COGM in Business Central?
Use the Output column of the Production Order – WIP report. Run Adjust Cost – Item Entries and Post Inventory Cost to G/L first so it matches the ledger.
Sources
- AccountingTools: Cost of goods manufactured schedule, July 13, 2026
- OpenStax: Underapplied or overapplied overhead, February 14, 2019
- Journal of Accountancy: FASB Statement No. 151, February 1, 2005
- Wiss: Manufacturing overhead allocation methods, May 6, 2026
- Microsoft Learn: Production order posting, July 1, 2025
- Microsoft Learn: Production Order – WIP report, March 10, 2026
- Microsoft Learn: Inventory Valuation report, April 1, 2026
- Microsoft Learn: Accounts in the general ledger, March 17, 2026
- Microsoft Learn: Work and machine centers, July 15, 2026
- Microsoft Learn: Reconcile inventory costs with the G/L, August 29, 2024
- NetSuite Help: Using WIP on work orders, no date shown
- NetSuite Help: Manufacturing cost templates, no date shown
- NetSuite Help: Shop floor reports, no date shown
- NetSuite Help: Inventory Valuation Detail report, no date shown
- MYOB Acumatica Help: Work in Process report, no date shown
- MYOB Acumatica Help: Close Production Orders, no date shown
Sherman Hsieh
Independent analysis of enterprise software — ERP, CRM and more
