How to calculate total manufacturing cost

Total Manufacturing Cost = Direct Materials + Direct Labor + Manufacturing Overhead

Total manufacturing costs relate to the expenses of all resources to develop and create a finished product.

To get an accurate calculation of your company's total manufacturing costs, you must look at the different departments in your company and identify how they contribute to the manufacturing procedures and processes and the associated costs.

Here is a quick breakdown of the three main variables in the total manufacturing cost formula:

• Direct Materials. This refers to the total cost of materials purchased for a given period. You must add this total to the cost of beginning inventory and then take away the cost of ending inventory. This will provide you with an accurate direct materials cost for a given period.

• Direct Labor. You need to evaluate and calculate all of your direct labor costs used in the manufacturing process for the period. This includes the salaries and wages of your workers, as well as any payroll taxes.

• Manufacturing Overhead. This cost is determined by combining the costs of all plant and production overhead for a given period. This includes costs like lease fees, rent, mortgages, repairs and maintenance expenses, and any depreciation of your facility or equipment.