Module 46: Cost Measurement and Assignment


A primary purpose of cost measurement is to allocate the costs of production (direct materials, direct manufacturing labor, and manufacturing overhead) to the units produced. It also provides important information for management decisions, such as product pricing decisions. Cost measurement is achieved through a costing system (job-order, process, activity-based) as described in this module. Before you begin the reading, you should review the key terms at the end of the module.

A. Cost of Goods Manufactured

Regardless of which costing system is used, a cost of goods manufactured (CGM) statement is prepared to summarize the manufacturing activity of the period. CGM for a manufacturing firm is equivalent to purchases for a merchandising firm. Although it may take different forms, essentially the CGM statement is a summary of the direct materials and work in process (WIP) accounts.

BWIP + DM + DML + MOH − EWIP = ...

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