Cost of Goods Manufactured Budget
Cost of goods manufactured budget is an operational component of master budget. It is prepared to calculate the manufacturing costs that are expected to be incurred on budgeted finished goods. The cost of goods manufactured budget is based on direct material purchases budget, direct labor cost budget and factory overhead budget.
The figures from direct labor budget and overhead budget are directly used in the preparation of cost of goods manufactured budget but the direct material purchase cost needs to be adjusted as shown below:
Direct Material Purchases
+ Direct Material Beginning Inventory
− Direct Material Ending Inventory
= Cost of Direct Material Used in Production
The next step is to calculate the budgeted cost of goods manufactured as follows:
Cost of Direct Material used in Production
+ Direct Labor Cost
+ Factory Overhead Cost
= Manufacturing Cost
+ Beginning Work in Process
− Ending Work in Process
= Cost of Goods Manufactured
Format and Example
The format of cost of goods manufactured budget is shown in the following example. For the sake simplicity, we have assumed zero work in process at the beginning and at the end of the periods.
| Company A | |||||
| Cost of Goods Manufactured Budget | |||||
| For the Year Ending December 30, 2010 | |||||
| Quarter | |||||
| 1 | 2 | 3 | 4 | Year | |
| Direct Material Purchases | $15,757 | $12,128 | $17,398 | $28,020 | $73,304 |
| Beginning Direct Material | 2,400 | 1,696 | 2,205 | 3,738 | 2,400 |
| Ending Direct Material | −1,696 | −2,205 | −3,738 | −3,844 | −3,844 |
| Direct Material Cost | $16,461 | $11,619 | $15,865 | $27,914 | $71,860 |
| Direct Labor Cost | 18,676 | 15,960 | 20,090 | 31,115 | 85,841 |
| Manufacturing Overhead | 23,508 | 21,180 | 25,868 | 41,282 | 111,838 |
| Total Manufacturing Costs | $58,645 | $48,759 | $61,823 | $100,311 | $269,539 |
| Beginning Work in Process | 0 | 0 | 0 | 0 | 0 |
| Ending Work in Process | −0 | −0 | −0 | −0 | −0 |
| Budgeted Cost of Goods Manufactured | $58,645 | $48,759 | $61,823 | $100,311 | $269,539 |
by Irfanullah Jan, ACCA and last modified on