A factory's production costs are the total expenses of doing business. Manufacturing costs are the expenses directly related to building the product. Both production costs and manufacturing costs ...

For decades, test was limited to a flat 2% of total manufacturing cost, a formula developed prior to the turn of the Millennium after chipmakers and foundries saw the trajectory for rising test costs.

Add direct labor and manufacturing overhead to this amount. This results in your total manufacturing costs. Add the work-in-progress beginning inventory present at the end of the accounting period.