 see in a merchandising company, we have the beginning balances plus the purchases minus the ending 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 three raw materials budget. We've got the 4,000 that's in units in the ending. 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 6, 11, 474 minus the 84,000 ending balance. And that would give us the direct materials used in the process being the 6, 25, 974. Remember, when we talk about 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 four, which is the direct labor budget. And we'll take the number at the end of the budget for the total of the quarter 4, 25, 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 five 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 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 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 less the ending 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 is gonna be the estimate for the ending 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 and the income statement, cost of goods sold, of course, being part of the budgeted income statement that we will need for the creation of that statement.