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.