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For this situation, the calculation of total manufacturing cost is as follows: 1  Direct materials. 2  Add the total cost of materials purchases in the period to the cost of beginning inventory, and subtract the cost of ending inventory.3  The result is the cost of direct materials incurred during the period. 4  Direct labor. Direct materials. 2  Add the total cost of materials purchases in the period to the cost of beginning inventory, and subtract the cost of ending inventory. 3  The result is the cost of direct materials incurred during the period. 4  Direct labor.
Step 1. Set up a standard costing system for direct materials. A business can initially assume or budget direct materials cost by implementing a standard costing system to estimate the expected purchase price and production usage of direct materials using the best information available.uppose that the business has set the standard direct materials cost at $20 per unit but actually purchases the materials later at $25 per unit for100 units for a total of $2,500.