Ending Finished Goods Inventory Budget – Selling & Administrative Expense Budget

Ending Finished Goods Inventory Budget

The ending finished goods inventory budget provides us with the information required for the construction of budgeted financial statements. After completing the previous 5 budgets (Sales Budget, Production Budget, Direct Material Budget, Direct Labor Budget and Factory Overhead Budget), a set of sufficient data will have been generated to compute the “per-unit manufacturing cost of finished product“. This computation is required for two reasons:

  1. to help compute the “cost of goods sold” on the “budgeted income statement“.
  2. to give the dollar value of the “ending finished goods inventory” to appear on the “budgeted balance sheet“.

So, an “Ending Finished Goods Inventory Budget” could be constructed as below:

 Ending Finished Goods Inventory Budget

Note: The “300 units” is pulled from “Production Budget – Desired Ending Inventory”.



Selling and Administrative Expense Budget

The selling and administrative expense budget lists the operating expenses involved in selling the products and in managing the business. Just as in the case of the factory overhead budget, this budget can be developed using the cost-volume (flexible budget) formula in the form of y=a+bx.

Note: If the number of expense items is very large, separate budgets may be needed for the selling and administrative functions.

Here is the “Selling Administrative Expense Budget” illustrated below:

 Selling and Administrative Expense Budget

Author: Lie Dharma Putra

Putra is a CPA. His last position, in the corporate world, was a controller for a corporation in Costa Mesa, CA. After spending 15 years as a nine-to-five employee, he decided to serve more companies, families and even individuals, as a trusted business advisor. He blogs about accounting, finance and tax, during his spare time, and helps accounting students (around the globe) to understand the subject matter easier , faster. Follow him on twitter @LieDharmaPutra or add him to your circle at Google Plus Lie+

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