The direct materials, direct labor, and factory overhead budgets will be used to determine the budgeted schedule of cost of goods manufactured. It is important to know the cost of goods manufactured; it allows you to estimate how much it will cost to produce each unit. All of the information needed for this budget is available in the direct materials, direct labor, and factory overhead budgets except for the dollar amounts for beginning and ending work in process inventory. The dollar amounts for beginning work in process inventory and estimated ending work in process inventory are shown below:
| Beginning work in process inventory | $0 |
| Ending work in process inventory | $0 |
| Production Budget | Total for Year |
|---|---|
| Total units to be produced | 6,400 |
| Direct Materials Budget | Total for Year |
|---|---|
| Beginning inventory, direct materials | $550 |
| Ending inventory, direct materials | $600 |
| Budgeted purchases of direct materials | $19,250 |
| Direct Labor Budget | Total for Year |
|---|---|
| Budgeted direct labor costs | $43,520 |
| Manufacturing Overhead Budget | Total for Year |
|---|---|
| Total budgeted overhead fixed costs | $16,280 |
| Beginning work in process inventory |
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|
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| $0 |
| Direct materials used: |
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|
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|
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|
| Beginning direct materials inventory | $550 |
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|
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|
| Purchases of direct materials | $19,250 |
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|
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|
| Direct materials available for use | $19,800 |
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|
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|
| Ending direct materials inventory | $600 |
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|
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|
| Direct materials used |
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| $19,200 |
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|
| Direct labor |
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| $43,520 |
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|
| Total factory overhead costs |
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| $16,280 |
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|
| Total manufacturing costs |
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|
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| $79,000 |
| Total manufacturing costs to account for |
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|
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| $79,000 |
| Ending work in process inventory |
-
|
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| $0 |
| Cost of goods manufactured |
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|
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| $79,000 |
| Total number of units produced | 6,400 |
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|
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|
| Costs per unit to manufacture | $12.34 |
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|
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|
A previous lesson reviewed the preparation of the schedule of cost of goods manufactured. The calculation of the cost per unit to manufacture the 6,400 units is shown below:
The budgeted selling price is $30 per unit, and you estimate that it will cost the company $12.34 per unit to produce the units.
The bottom line for this budget is the estimate of the cost of goods manufactured for the upcoming year. The budgeted cost of goods manufactured, $79,000, will be needed for the budgeted income statement.