What Are the Different Ways to Determine Cost of Goods Sold?

After the finished product is sold, because the inventory product is reduced, the product cost of the finished product needs to be reduced from the inventory cost, and the reduced product cost becomes the "product sales cost".

Product cost of sales

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The methods for carrying forward the production costs of sold products include the first-in-first-out method, last-in-first-out method, weighted average method, and individual pricing method. The weighted average method can usually be used to calculate the unit production cost of the sold product. The calculation formula is as follows:

After calculating the unit cost of the product sold, you can use it to calculate the current cost of product sales. The calculation formula is as follows: product sales cost = weighted average unit cost product sales quantity The following example illustrates the calculation method of product sales cost.

Example: The Xinhua plant sold 650 A products and 1,100 C products in March 2001. The inventory of products in early March is as follows: 200 sets of A products, the unit cost of 55.29 yuan; 400 units of C products, the unit cost of 41.25 yuan. The completed quantities and unit costs of A and C products in March are shown in the table below. The weighted average method is used to calculate the cost of products sold as follows:

Product production cost calculation table

Cost item	A product (800 units)		C products (1000 pieces)
	total cost	unit cost	total cost	unit cost
direct material	32000	40	35000	35
Direct labor	3192	3.99	5000	5
Manufacturing costs	8000	10	6500	6.50
total	43192	53.99	46500	46.50