To compute the cost of materials into finished goods, you should add your assets needed to create your finished good.
For instance, to make a box full of kittens, I need to gather my material, Box, and Kittens. I find a farm selling or giving free kittens, cost = free. Then I get a box from the recycling center, cost = free. Then I label my box and tape it up. The roll of tape is good for about 25 boxes and costs 8$. 25/8 = $3.13 per box and the labels cost, we'll say 2 cents per box. And we'll say one marker to write on the label costs 5 cents per box. So you pay $3.20 per box and sell each box for $5. Your cost of production is $3.20.
