 Hello in this lecture we're going to continue with the master budget part four if you haven't looked at the previous three parts take a look at those we'll be continuing in part four with the budgeted cost of goods manufactured and cost of goods sold. We will be able to at the end of this list components of the master budget. First a word from our sponsor well actually these are just items that we picked from the YouTube shopping affiliate program but that's actually good for you because these aren't things that were just given to us from some large corporation which we don't even use in exchange for us selling them to you these are things that we actually researched purchase and use ourselves. 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for that time period and the selling and administrative budget then we can do the cash budget and then we're gonna move on to basically the balance sheet and we are looking at calculations that will be needed in order for the cost of goods sold section in the balance sheet at this point so in order to create the balance sheet we need the cost of goods sold and now in order to have the cost of goods sold for a manufacturing company we're going to work on the cost of goods manufactured that's what we'll be taking a look at here then moving on to the balance sheet and income statement and statement of cash flows are the statements that could be done after that point in time all right then we're gonna go through that what we have done so far these are gonna be the budgets that we have done so far quick overviews because we will be jumping back to these in order to complete what we are going to do today cost of goods manufactured and cost of goods sold so we started off with the sales budget which looked like this we then did the production budget in step two then we did step three raw materials budget and then we did step for the direct labor budget and then we did the factory overhead budget the selling and expense budget and the general administrative budgets we have all those pieces now and we're gonna use those pieces going forward we then made the cash budget using many of those pieces now we're gonna move forward from that to go to our major financial statements at the bounty the income statement these statement of cash flows and we're going to use the next calculation in order to help us out with the income statement portion which will be the cost of goods manufactured so that we can use that to get the cost of goods sold so that we could use that on the income statement all right so here we have cost of goods manufactured we're gonna start off with the raw materials so the raw materials were pulling from the balance sheet from the prior period so this is the prior periods balance sheet here's the raw materials that we're gonna start with beginning raw materials will be of course the same as the Indian raw materials in the prior period so we can get that from the financials from the prior period then we have the raw materials we're gonna purchase how much are we gonna buy we figured that out earlier and we did that in the raw materials budget so we did this budget and we came out to the raw materials purchases here 611 474 and that's what we're gonna put right there so that's gonna be the purchases that we will be then making and then we're gonna have the less of the raw materials Indian inventory so this is going to be similar to kind of the cost of good sold calculation you'd see in a merchandising company we have the beginning balances plus the purchases minus the Indian balance and here we're gonna do this calculation to figure that out we could go to the raw materials budget we're jumping back up to step 3 raw materials budget we've got the 4,000 that's in units in the Indian and we have the $21 per unit so if we multiply those together we would come up with the 84,000 so now we're subtracting out the 84,000 so we're back to the budget of cost goods manufacturer where we had the beginning 98 5 plus the purchases 611 474 minus the 84,000 Indian balance and that would give us the direct materials used in the process being the 625 974 remember when we talk about the the manufacturing of inventory we're talking about direct materials direct labor and overhead this is the calculation we need to go through in order to get the amount of the direct material that it was actually used in this case then we're gonna take a look at the direct labor might be a little bit more straightforward we're gonna jump back to step 4 which is the direct labor budget and we'll take the number at the end of the budget for the total of the quarter 425 99 and that will be the direct labor numbers next piece we're gonna have the factory overhead so now we of course have the direct materials and now we have the direct labor next piece is the factory overhead we're gonna have the variable portion and the fixed portion we're gonna jump back to our budget for factory overhead in step 5 in order to get those two numbers so we have the variable portion here and the fixed portion so variable portion fixed portion 78 111 and 63,000 will give us the 78 111 and 63,000 for the factory overhead that will give us the total factory overhead of 141 111 so now we have our three components in the outer column that being the direct materials the direct labor and the factory overhead we will then of course add those three up we're gonna add this outer column up so we're adding the 625 975 plus 425 99 plus 141 111 giving us the 1,187 685 then we're gonna have the working process at the beginning there was none in this case but we're gonna go through these full calculation just to have it here then we got the total working process which is of course this and the zero giving us the same number and then we have the working process inventory ending again is zero in the case in this case here and that would give us the cost of goods manufactured so that's gonna be our calculation for the cost of goods manufactured we will then use that number the whole point of this is to use that number in the cost of goods sold calculation which will be needed on the income statement the budgeted income statement all right so we have the cost of goods sold now our familiar formula from all from our inventory type companies the merchandising companies still starts off with the beginning finished goods inventory but then instead of purchases as we would have if we just purchased inventory and sold it we're gonna put in the cost of goods manufactured because in this case we are manufacturing the goods and therefore we have to do that full calculation that we had just done the cost of goods manufacturing calculation in order to put this in place of where purchases would normally go if we were a merchandising company and that will give us the cost of goods available for sale so this would be the amount that would be available for sale if we were to sell everything for that time period and then we're gonna have a less the Indian goods inventory so in a book problem they would have to give you that number in real life we'd have to figure out what we're going to be the estimate for the Indian goods the finished goods inventory and that would give us the cost of goods sold so there we have the cost of goods sold number we can then move on to the final piece which is the balance sheet in the income statement cost goods sold of course being part of the budgeted income statement that we will need for the creation of that state