Cost of goods manufactured definition. Analyzing the definition of key terms often provides more insight about concepts. Cost of goods manufactured can be defined as – Total manufacturing costs (direct materials, direct labor, and factory overhead) for the period plus beginning work in process less ending work in process; also called net costs of goods manufactured and costs of goods completed. Cost of good manufactured is a calculation used for a manufacturing company, the cost of goods manufactured calculation being necessary for the cost of goods sold calculation, cost of goods manufactured replacing purchases in the cost of goods sold calculation. Direct material, direct labor, and factory overhead will be considered when calculating cost of goods manufactured, the being the components of inventory. The cost of goods manufactured calculation will first calculate these inventory costs incurred for the month and will then add the beginning inventory number. The cost of goods manufactured calculation will then subtract out ending work in process to arrive at the cost of goods manufactured total, this total can then be used in the cost of goods sold formula.