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
Direct Material Purchases$15,757$12,128$17,398$28,020$73,304
Beginning Direct Material2,4001,6962,2053,7382,400
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 Cost18,67615,96020,09031,11585,841
Manufacturing Overhead23,50821,18025,86841,282111,838
Total Manufacturing Costs$58,645$48,759$61,823$100,311$269,539
Beginning Work in Process00000
Ending Work in Process−0−0−0−0−0
Budgeted Cost of Goods

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