Op. Bal Fin.

Goods + Cost of production – COGS = End Bal of FG

Example: Units Eq: 100 + 900 – 800 = 200

COGS = Cost of Production - Ending Fg + Opening FG

COGS = Cost of production – Change in FG Inv.

Op Bal of WIP + RM Consumed + Labor + Mfg. OH – COP = Cl WIP

Cost of Prod = RM Consumed + Labor + Mfg. OH – Change in WIP

COGS = RM Consumed + Labor + Mfg. OH – Change in FG Inv – Change in WIP

Example of Numbers Reported in an Annual Report

RMC + Labor + MOH – Change in FG & WIP

100 + 60 + 90 – 30

This implies that:

-30 = – Change in FG Inv – Change in WIP

Therefore, when companies report a number for change in FG & WIP, simply take the number as
reported and add it to RM + Labor + MOH.