 The cost of goods sold budget is based on data from the sales budget, production budget, direct materials budget, direct labor budget, and manufacturing overhead budget. So obviously it needs to be completed after all of those. You can see that the cost of goods sold budget is the sixth budget completed in the master budget process. One format to determine the cost of goods sold is to take direct materials and direct labor costs, add those and divide by units produced. Then add manufacturing overhead to that to arrive at a cost per unit. Then multiply that by budget and sales volume to arrive at costs of goods sold. Here we have the total direct materials cost from the direct materials budget. Here we have the total direct labor costs from the direct labor budget. Units to be produced comes from the production budget. In this step we are adding direct materials and direct labor, which we learned are known as prime costs, and dividing them by production units to arrive at prime costs per unit. Next we add overhead to the direct material and direct labor costs. Our predetermined overhead rate from the production budget is $29.98 per direct labor hour. From our direct labor budget we see that it takes one-tenth of a direct labor hour to make one unit. So our allocated or applied manufacturing overhead is $3 per unit rounded. Once we add those together we arrive at our product cost per unit. Finally we take the sales volume from the sales budget, multiply it by the cost per unit and arrive at our budgeted costs of goods sold.