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