Cost of goods sold budget
Cost of goods sold budget: the master-budget schedule that combines budgeted direct materials, direct labour, overhead and finished-goods inventory changes into a single cost of goods sold figure.
See it move
A manufacturer budgets direct materials at €30,000, direct labour at €25,000 and overhead at €20,000, giving cost of goods manufactured of €75,000. Starting from €10,000 of beginning finished-goods inventory, adding that €75,000 and subtracting a desired €12,000 of ending finished-goods inventory gives a budgeted cost of goods sold of €10,000 + €75,000 − €12,000 = €73,000.
The formula
Variables
- Budgeted cost of goods sold (€)
- Beginning finished-goods inventory (€)
- Direct materials used (€)
- Direct labour (€)
- Manufacturing overhead applied (€)
- Ending finished-goods inventory (€)
Gives budgeted cost of goods sold by adjusting cost of goods manufactured (direct materials, direct labour and overhead) for the change in finished-goods inventory.
Check yourself
A manufacturer budgets direct materials used at €42,000, direct labour at €31,000 and manufacturing overhead applied at €27,000, with no work-in-process at the start or end of the month. Beginning finished-goods inventory is €15,000 and the desired ending finished-goods inventory is €19,000. What is the budgeted cost of goods sold?