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 GoodsManufactured \$58,645 \$48,759 \$61,823 \$100,311 \$269,539

by Irfanullah Jan, ACCA and last modified on

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