---
title: "Cost of goods manufactured"
description: "What cost of goods manufactured (COGM) is, the COGM formula, how it differs from cost of goods sold, and a full statement of cost of goods manufactured."
canonical: https://ledgeriano.com/glossary/cost-of-goods-manufactured
language: en
publisher: "Ledgeriano"
updated: 2026-11-06
---

# Cost of goods manufactured

> What cost of goods manufactured (COGM) is, the COGM formula, how it differs from cost of goods sold, and a full statement of cost of goods manufactured.

Cost of goods manufactured is the total production cost of goods completed during a period: direct materials used, direct labour and manufacturing overhead, adjusted for the change in work in progress. It is transferred to finished goods and is the bridge between production costs and cost of goods sold in a manufacturer's income statement.

The calculation runs in three layers. First, direct materials used equal opening raw materials plus purchases minus closing raw materials. Second, total manufacturing cost adds direct labour and overhead. Third, cost of goods manufactured adjusts for opening and closing WIP.

Cost of goods sold then adds opening finished goods and deducts closing finished goods. Confusing the two is common: COGM is what you finished, COGS is what you sold.

Ledgeriano produces a statement of cost of goods manufactured and sold from posted stock and production documents, so the figures tie to the [inventory and cost accounting](https://ledgeriano.com/guides/inventory-cost-accounting) ledgers without a spreadsheet.

```
Direct materials used = Opening raw materials + Purchases - Closing raw materials
COGM = Direct materials used + Direct labour + Overhead + Opening WIP - Closing WIP
COGS = Opening finished goods + COGM - Closing finished goods
```

## Example: statement of cost of goods manufactured and sold

A small manufacturer's figures for the year:

| Line | Amount |
| --- | --- |
| Opening raw materials + purchases - closing raw materials | 20,000 + 130,000 - 30,000 = 120,000 |
| Direct labour | 80,000 |
| Manufacturing overhead | 60,000 |
| Total manufacturing cost | 260,000 |
| Add opening WIP, less closing WIP | + 25,000 - 35,000 |
| Cost of goods manufactured | 250,000 |
| Add opening finished goods, less closing finished goods | + 40,000 - 50,000 |
| Cost of goods sold | 240,000 |

### Is COGM shown on the income statement?

Not as a separate line in IFRS statements. It is shown in a supporting schedule, and its effect reaches the income statement through cost of sales.

### Does COGM include selling costs?

No. Only production costs are included. Selling, distribution and administrative costs are period expenses.

Guide: https://ledgeriano.com/guides/inventory-cost-accounting