 Hello in this lecture. We're gonna continue on the master budget We will continue to the next piece being the budgeted costs of goods manufactured First a word from our sponsor Yeah, actually we're sponsoring ourselves on this one because apparently the merchandisers they Don't want to be seen with us, but but that's okay Whatever because our merchandise is better than their stupid stuff anyways like our CPA six-pack shirts I must have for any pool or beach time Mixing money with muscle always sure to attract attention Yeah, even if you're not a CPA you need this shirt So you can like pull in that iconic CPA six-pack stomach muscle vibe man You know that CPA six-pack everyone envisions in their mind when they think CPA Yeah, as a CPA, I actually and unusually don't have tremendous abs However, I was blessed with a whole lot of belly hair Yeah, allowing me to sculpt the hair into a nice CPA six-pack like shape, which is highly attractive Yeah, maybe the shirt will help you generate some belly hair too, and if it does make sure to let me know Maybe I'll try wearing it on my head And yes, I know six pack isn't spelled right, but three letters is more efficient than four So I trimmed it down a bit. Okay. It's an improvement If you would like a commercial free experience consider subscribing to our website at accounting Instruction comm or accounting instruction dot think-a-fic comm Let's take a quick recap of where we have been so far once again We had to start off and we do have to do these in order with the sales budget and the production budget Then the raw materials budget the direct materials budget the factory overhead budget the selling budget General administrative cash type accounts so that we could then make the cash budget Now we're going to go on to the budget for cost of goods manufactured Obviously, this seems like a awfully long process, but if we break it down to the pieces It's really not so bad when we look at it all as a whole it could look quite intimidating All right, so we're gonna start off with the raw materials now Remember there's three pieces to the cost of goods manufactured what goes into our inventory process raw materials labor and Overhead so we're gonna start off with the raw material now I'm gonna start off with the raw materials inventory at the beginning of the time period So we're gonna start off with raw materials at the beginning of the time period We're gonna get that from our balance sheet up top. So if we take a look at the balance sheet We have raw materials ninety eight five hundred ninety eight five Hundred then we're gonna add to that the raw materials that were purchased so raw materials purchase. I'm gonna select tab We're gonna select equals and we're gonna go up to the raw materials budget where we have that information So we're gonna scroll up to the raw materials here And if we go to the bottom of this item, we can see that for the quarter We have the total purchases of the six hundred eleven four seventy four dollars. So that's what we're gonna have That's what we purchased then we're gonna subtract from that the raw material at the end the raw material it's still in there know that this is very similar to our cost of goods sold calculation for like a meant for a Company that sells inventory basically so less raw material inventory at the end Indian raw material inventory We're gonna select equals we're gonna go back up to our raw materials up top So we're looking for where we calculated the raw materials here It is part number three and you can see that here we have the Indian inventory materials purchase materials price Here's the budgeted Indian inventory four thousand units So I'm gonna take that four thousand that's in units though and we're gonna multiply that times the cost per units Which is of course this twenty one dollars. That's how much the raw materials cost per unit therefore, we're gonna come up with the 84,000 and that will give us the direct materials that will be used so we have direct material to use I'm gonna pull that out to the outside and it's gonna equal remember. It's gonna equal what we started with plus what we purchased Minus the ending inventory. That's what we use what we had plus what we purchased minus Which still there is what we have used in the process of manufacturing as part of our inventory now included in that We also have direct labor Which is a lot more easy and straightforward. We're gonna put that right in the outer column We're not gonna have to do this type of calculation in order to get that That's why we'll put it right in the outer column and that's gonna equal I'm gonna go up to the labor budget up here where we figured out the direct labor and we have the 425.99 that's the labor that is included in our inventory Then we're gonna have the factory overhead Factory overhead and that's gonna have a variable portion and a fixed portion I'll just put those both in here now fixed portion And we're gonna go to our overhead budget These are gonna be once again pretty straightforward because these will be what that it'll be what they are We're not gonna have to do the calculation again like this in the raw materials We've already done that in our budget up top. So let's go up to the overhead budget. So here's our overhead Here's the variable portion. We're gonna pick up that 78,000 and that's gonna go into the inventory the overhead that we couldn't put into a bucket It's gonna go into the inventory then we're gonna have the fixed portion That was remember the depreciation So we're gonna go up to the overhead the fixed portion 63,000 and that is that and that will give us the total factory overhead So we're gonna have total factory overhead and select tab tab. I'm gonna pull that over to the outside We're gonna sum these two numbers up. We're just adding up to 78, 111 and the 63,000 I'm just gonna sum those up like this Some those two items so those added together I'm gonna indent this one more time if you're wondering how these are indented when they're in The same cell the same column you go up to the home tab you go up to this and you indent So we're saying this is what we're gonna calculate here. It is indented here It is having been calculated we do not indent direct labor because it's already it's just one number in the outer column we could also underline these if we wanted to go on here and go into the home tab font underline and Underline here going to the home tab font and underline in this way as well That'll give us our total manufacturing cost so total manufacturing costs I'm gonna tab that all the way out to the end and we actually do not like triple You know indent this one We're gonna bring it back to the base in this case and we're gonna add up only the outer column the column We only add up one column at a time So that's of course gonna include the direct materials the direct labor and the factory overhead that we have calculated so that's gonna equal the sum of This direct materials direct labor and the factory overhead and enter Now we don't have any work in process because this is basically kind of a simplified problem in that We're saying that whatever we produce is we're gonna produce in that time period We're not gonna have anything left over in the production process. We're gonna start it We're gonna complete it in the same time period. So I'll just put in the work in process here Just so you can see how that would be in here So here we have the work in process at the beginning once again We would get that from of course that the balance sheet up here, but there is no work in process notice We have raw materials and finished goods what that indicates is that it's a very fairly quick process to Manufacture and therefore we're not caught at the end with it with a lot of stuff That's within the processing time that it's basically being we started we complete it And so we have zero work in process if there was work in process of course at the beginning We would have to account for that and then we're gonna say that's gonna be the Total manufacturing costs plus what was in beginning work in process and then we would have to take out What is still in the work in process the stuff? That's not done yet stuff not yet in Indian inventory once again, we're saying it's zero in this problem There's nothing that has not been completed. We're gonna complete it within the time period So that's gonna be this it would be this minus this so we got the Cost of goods manufactured will then be this one million one eighty seven six eighty five The next piece we want to take a look at that we'll need for the income statement is to calculate the cost of goods sold We're gonna need this number instead of having purchases as we would have if we just purchased the inventory We have in replacing that in the calculation cost gets sold this number being the cost of goods manufactured So let's plug this into the cost of goods sold formula We start cost goods sold out with the beginning finish goods inventory just like we would if we bought the inventory same process Although we are manufacturing in this process beginning finished goods inventory is going to be whatever is on the balance sheet Of course up here So we're gonna go up to a balance sheet and we say what did we start with in finished goods inventory this 325? 540 so three two five five four zero is what we have and Then we're gonna add to that what are we gonna add to it what we just calculated up here the cost of goods manufactured? Instead of purchases if we were in a purchasing company We just bought and sold inventory would be purchases of course but now we had to do this whole worksheet so that we can figure out the Stuff that we turn from raw material into inventory through our labor through our overhead and of course the raw materials And then we're gonna say less the ending finished goods inventory So we have the ending finished goods inventory What do we have still in finished goods at the end and that's going to equal? I'm gonna say equals and we're gonna go up to the production up here And we saw our budget and we have the production we're gonna say that the Less the beginning the ending finished goods inventory is right here So budgeted ending finished goods, but that's in units. That's in units And remember they told us over here on this that we have the production cost per unit. We're gonna say that per unit it cost $19.50 $19.50 so we're gonna take the units at the end multiply that times $19.50 and so that's what we're gonna have less the ending inventory So now we're allocating that to this the portion that is still left over in ending inventory. Here's what we started with Here's what we purchased. Here's I mean here's what we made Manufactured here's what we say is still left So now we're gonna do the calculation for the cost of goods sold cost of goods Sold then is going to equal the beginning inventory plus what we manufactured Minus what's still in there. That's what we have actually sold at this time