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Understanding Cost of Goods Manufactured

3 min read

Understanding Cost of Goods Manufactured, What is Cost of Goods Manufactured, what is COGMWhen it comes to the latest report for March 2026 manufactured goods orders, according to the United States Census Bureau’s May 4 report, the government agency reported a 1.5 percent bump in orders for the nation’s manufacturers, growing to $630.4 billion. Understanding concepts like Cost of Goods Manufactured (COGM) is essential to smooth operations.

The cost of goods manufactured (COGM) reflects the total manufacturing costs a company incurs during a particular accounting period to complete goods. It includes direct materials used, direct labor, and manufacturing overhead. COGM helps businesses manage inventory levels and serves as a key input for calculating the cost of goods sold (COGS) reported on the income statement.

COGM Formula:

The standard formula is:

COGM = Beginning Work-in-Process (WIP) Inventory + Total Manufacturing Costs – Ending Work-in-Process (WIP) inventory

Defined as:

Total Manufacturing Costs = Direct Materials Used + Direct Labor + Manufacturing Overhead

Hypothetical Example:

Based on the following numbers, the COGM would be calculated as follows:

  • Direct Materials Used: $200,000
  • Direct Labor: $75,000
  • Manufacturing (Production) Overhead: $120,000
  • Beginning WIP Inventory: $20,000
  • Ending WIP Inventory: $60,000

First, calculate Total Manufacturing Costs: $200,000 + $75,000 + $120,000 = $395,000

Then:

COGM = 20,000 + 395,000 – 60,000 = 355,000

So, the Cost of Goods Manufactured is $355,000.

Interpreting COGM:

The first step is to analyze how each input contributes to the result. This involves reviewing direct materials, direct labor, and overhead to determine the complete production costs for the accounting period. By evaluating each component’s contribution, companies can better project manufacturing capacity and cost-effectiveness.

Direct Materials Used in Production

Direct Materials Used = Beginning Raw Materials Inventory + Purchase of Raw Materials – Ending Raw Materials Inventory

This amount is then incorporated into the Total Manufacturing Costs (and ultimately the WIP inventory) shown above.

Calculating Direct Labor and Manufacturing Overhead:

Direct labor costs are determined from time logs or clock-ins (hours worked × hourly rate). Manufacturing overhead includes indirect production costs such as factory utilities, depreciation, and supervision.

Translating COGM to Cost of Goods Sold:

Once calculated, COGM is transferred to the Finished Goods Inventory account. Finished Goods Inventory consists of completed products ready for sale to customers. The standard relationship is:

COGS = Beginning Finished Goods Inventory + COGM – Ending Finished Goods Inventory

(or equivalently: Ending Finished Goods Inventory = Beginning Finished Goods Inventory + COGM – COGS)

Conclusion:

COGM shows whether production costs are too high or too low relative to sales. For example, if one business generates $2,000,000 in revenue with $1,500,000 in COGS (25% gross margin), while another has $1,500,000 in revenue but only $750,000 in COGS (50% gross margin), the second company demonstrates stronger profitability.

Understanding COGM enables businesses to optimize costs related to labor, overhead, and materials, ultimately improving net income and operational efficiency. When calculating and reporting COGM, it is essential for businesses to apply these concepts accurately in their accounting and bookkeeping practices.

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Windfall Planning Makes Sense for Everyone

5 min read

Windfall Planning, what are Financial windfallsFinancial windfalls are not uncommon. Every year, entrepreneurs who build their businesses from scratch sell them for millions in profit. In 2024 alone, state lotteries paid out a combined $70.2 billion to prize winners. Additionally, over the next 20 years, around $84.4 trillion in wealth transfers are expected to take place, with $72.6 trillion of this going to heirs and the other $11.9 trillion going to charities.

After scrimping and saving for years, a large windfall of money can seem like a dream come true. However, there are many factors to consider when receiving a substantial sum of money all at once. The key to making a windfall last beyond initial purchases is to think about what you want your money to do for you. If it’s enough to substantially change your life, then you should take some time to figure out what you want your new life to look like. The bigger the windfall, the more time and professionals you’ll need to consult to determine how to manage your assets going forward.

The first step is to answer three questions:

  1. What are your short- and long-term financial goals? (And have they – or should they – change after learning about your windfall?)
  2. Who should be involved in the financial decision-making? (e.g., spouse/family, financial advisor, tax expert, estate planning attorney)
  3. What is the nature of the funds to be received? (e.g., cash, investments, property, a business, etc.)

Do not be rash with large sums of money. It can take three months or more to set up certain accounts, trusts, and various strategies for receiving and managing a windfall. Take plenty of time to make decisions and conduct transactions appropriately to ensure they minimize tax liability and meet your short- and long-term goals.

Speaking of which, start out by making a priority list. It’s a good idea to use a cash windfall to meet the first two goals in the list below before considering other options.

  • If you don’t already have one, establish a three to six-month emergency fund in a high-yield, liquid account.
  • Pay off debt such as credit cards, auto loans, medical bills, perhaps even your mortgage.
  • Consider the merits of allocating funds toward a variety of expenses instead of spending it all in one place. For example, consider the impact of appropriating money to investments in your house, your children’s education and retirement. Spreading your windfall across multiple accounts allows those dollars to grow even if you do not continue contributing – getting started with a little is better than having nothing growing toward those goals.
  • Consider how to use the money to make more money. For example, invest in a business or purchase property for rental income and/or equity growth.
  • If you’re thinking of making charitable gifts, consider how you can honor your benefactor (assuming the windfall comes from an inheritance) by donating money in their name. You might be able to offset your own tax liability by transferring a portion of the windfall directly to the charitable entity. Also consider creating your own private foundation or directing a donor-advised fund to manage the assets and donate to specific charities; this tactic enables the assets to continue growing for future charitable donations.

Family Business

Should you inherit a family business or partnership, consult with an experienced tax advisor to decide whether to continue participating in the business interest or even use it as collateral for other investments. This strategy positions the asset for continued growth so you don’t have to cash out and pay taxes on gains in order to use the money.

Lottery or Structured Settlement

If you win big with the lottery, you’ll need to decide whether to receive the assets as a lump sum or an annuity. Be aware that when you take the prize money all at once, the IRS automatically withholds 24 percent of the winnings off the top. Furthermore, if your windfall tops $640,600 for a single filer or $768,700 for a married couple filing jointly (2026), it will be subject to federal income tax at the 37 percent top tax rate. That money also may be subject to state and municipal taxes based on local laws. In some high-income-tax states, that could mean you lose half of the winnings.

If you opt to receive money as an annuity (i.e., guaranteed income spread out over time, such as 30 years), the total payout might be cumulatively higher because it spreads out your tax liability. Depending on your long-term income trajectory, you could avoid the highest income tax bracket. Other windfalls that function like a lottery payout include structured settlements from civil lawsuits (e.g., personal injury, wrongful death)and retirement pension plans.

Depending on the amount of money coming your way, it is highly advisable to consult with financial planning professionals, because how fund transfers are conducted and how much money you withdraw each year can greatly influence your tax bill. It is important to solicit one or more opinions to ensure that your financial moves address both your current and future objectives.

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Advancing Broadband, Tribal Land Mortgages and Affordable Single-Owner Housing Opportunities

3 min read

Tribal Land MortgagesS.98: Rural Broadband Protection Act of 2025 – This bipartisan bill instructs the Federal Communications Commission (FCC) to establish a vetting process for service provider applicants applying for federal funding assistance for broadband deployment in high-cost areas, including rural communities. Sponsored by Sen. Shelley Moore Capito (R-WV) on Jan. 15, 2025, the bill passed in the Senate on June 26, 2025, and in the House on April 20, 2025. It was signed into law by the president on May 11, 2026.

S.723: Tribal Trust Land Homeownership Act of 2025 – Introduced by Sen. John Thune (R-SD) on Feb. 25, 2025, this bill requires the Bureau of Indian Affairs to complete the processing of all residential and business mortgages on Indian land by certain deadlines. It passed in the Senate on Dec. 11, 2025, in the House on March 4, and was enacted on May 4.       

A joint resolution to direct the removal of United States Armed Forces from hostilities within or against the Islamic Republic of Iran that have not been authorized by Congress (SJ Res 185) – Well past the 60-day deadline for a president to legally engage in military hostilities abroad without congressional authorization, Sen. Tim Kaine (D-VA) introduced his resolution on April 27. The resolution would remove U.S. military troops from Iran unless explicitly authorized by Congress. On May 19, the resolution narrowly passed in the Senate Foreign Relations Committee, now moving to the Senate floor for debate and a full vote. The resolution faces an uphill battle in the House. However, even if the joint resolution cleared the Senate and the House, it is expected to be vetoed by the president and would require a two-thirds supermajority by both the Senate and the House to override the veto – which is unlikely at this point.          

21st Century ROAD to Housing Act (HR 6644) – This bipartisan, White House-endorsed bill addresses housing affordability by placing ownership restrictions on large institutional investors and expanding available financing for homebuyers. One provision would prohibit institutional investors/private equity firms that own more than 350 single-family homes from purchasing additional single-family homes – unless they are sold to individual homeowners after seven years. The act would impose a penalty of up to $1 million per violation or three times the purchase price of the property, whichever is greater. Other provisions waive regulations on community banks to help expand local lending. The bill was introduced by Rep. French Hill (R-AR) on Dec. 11, 2025. It passed in the House on Feb. 9, in the Senate with changes on March 12, and in the House again with changes on May 20. The bill is currently under consideration in the Senate for the second time.