How do you calculate work in progress inventory?
Take opening work in progress, add the manufacturing costs put in during the period (direct materials, direct labour and applied overhead), then subtract the cost of goods manufactured. The remainder is what is still on the factory floor, part finished.
Work in Progress Calculator formula
Closing WIP = Opening WIP + (Materials + Labour + Overhead) - Cost of goods manufactured
Worked example: Opening 15,000 plus 90,000 of costs added less 95,000 completed leaves 10,000 in closing work in progress.
How this works in your browser
Ending work in progress is opening WIP plus manufacturing costs added, minus cost of goods manufactured. Only production costs enter the calculation: direct materials, direct labour and applied overhead. Selling and administrative costs are excluded because they are period expenses rather than costs absorbed into a unit, and including them would both overstate inventory on the balance sheet and understate expenses on the profit and loss. Computed in your browser.
Who uses Work in Progress Calculator
Manufacturing accounts
Value partially completed production for period-end reporting.
Spotting bottlenecks
Track rising WIP as a signal that production has stalled somewhere.
Cash flow analysis
See how much working capital is tied up in unfinished goods.
Feeding finished goods
Produce the cost of goods manufactured figure the next stage needs.
Frequently asked questions
What counts as work in progress?
Anything that has entered production but is not yet a finished, sellable unit: partly assembled goods, items awaiting a later stage, and the materials, labour and overhead already absorbed into them. Raw materials not yet started are not WIP.
How is ending WIP calculated?
Opening WIP plus total manufacturing costs added during the period, minus cost of goods manufactured, which is the cost of everything completed and moved to finished goods. The same flow identity as other inventory stages.
Why does WIP matter?
It is cash sitting in half-finished goods that cannot be sold. Rising WIP with flat output usually means a bottleneck somewhere in production, so tracking it period to period is an early warning that something has stalled rather than merely an accounting exercise.
What manufacturing costs should I include?
Direct materials issued to production, direct labour, and applied manufacturing overhead. Selling and administrative costs are period expenses and do not belong in WIP, which is a common error that overstates inventory and understates expenses.
Are my figures uploaded?
No. Everything is calculated in your browser.