Page 87 - Budgeting for Managers

Budgeting for Managers
70
Beginning work-in-progress
—
Manufacturing Costs
Direct materials:
Beginning inventory $937,500
Purchases $26,687,500
Materials available for $27,625,000
manufacturing
Less: Ending parts inventory
Total direct materials costs $27,625,000
Direct labor $1,031,250
Manufacturing overhead
Total manufacturing costs $48,600 $28,704,850
Less: Ending work-in-progress —
Cost of goods manufactured $28,704,850
Add: Beginning finished goods
$2,125,000
inventory
Less: Ending finished goods
$4,250,000
inventory
Cost of goods sold $26,579,850
Table 4-5. Cost of goods sold budget

The items listed in the first column of numbers show the figures
for direct materials. In the second column, we add direct labor
and manufacturing overhead to get our total manufacturing costs.
In the third column, we then make three adjustments to this figure
based on the value of partly finished goods at the end of the year
and the value of the finished goods inventory at the beginning
and the end of the year. The result is our cost of goods sold.
The complete departmental budget would include a project-
ed income statement based on the value of the finished goods
sold or transferred to other business units for sale. It might also
include expense items, unless accounting chooses to count all
manufacturing costs as costs of goods sold and not expenses.
And accounting may make some adjustments if it wants to