> For the complete documentation index, see [llms.txt](https://local.docs.ssaudit.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://local.docs.ssaudit.com/english-1/costing-method/7.2-simple-method.md).

# 7.2 Simple Method

The Simple Method applies to companies with a simple production process and a small number of finished goods. This is the simplest costing method: total production costs are divided by the total quantity produced in the period.

> **Example:** Paint manufacturer, period 06/2026:
>
> * Direct materials: 120,000,000 VND | Labor: 40,000,000 VND | Manufacturing overhead: 20,000,000 VND -> Total cost: 180,000,000 VND
> * Finished goods received: 1,800 kg | Ending WIP (equivalent): 200 kg -> Produced quantity: 2,000 kg
> * Unit cost: 180,000,000 / 2,000 = 90,000 VND/kg

<figure><img src="/files/jeJt6lY7vRSQCe5pqKzy" alt=""><figcaption></figcaption></figure>

The process includes 6 steps:

**Step 1 — Summarize finished goods produced in the period**

The system summarizes finished goods warehouse receipts already entered.

**Step 2 — Summarize WIP and convert to equivalent finished goods**

Enter ending WIP quantity and completion rate. One product can have multiple WIP completion rates. The system summarizes them into total equivalent finished goods.

**Step 3 — Calculate products manufactured in the period**

> Products manufactured in the period = Finished goods received + Ending WIP - Beginning WIP

**Step 4 — Calculate product costing**

Direct materials, labor, and manufacturing overhead are divided by total products manufactured and multiplied by the quantity of each product.

**Step 5 — Calculate ending WIP value**

> Ending WIP value = Equivalent finished goods x Unit cost

**Step 6 — Determine finished goods receipt value**

> Finished goods receipt value = Beginning WIP + Production costs incurred - Ending WIP
>
> Unit cost = Total finished goods receipt value / Total finished goods receipt quantity

<figure><img src="/files/RrPPdNjOduIhxEJEJyaR" alt=""><figcaption></figcaption></figure>

> **Note:** For other costing methods, see [Costing](/english-1/inventory-management-module/production-cost-calculation.md).