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# Ending Finished Goods Inventory Budget - An Example

## Developing the Operating Budget

In developing the entire operating budget as an example for a small business, we are using a small hypothetical business, Art Craft Pottery, as an example. The following information can be used to develop the ending finished goods inventory budget:

### Information

You have already developed the direct materials, direct labor, and overhead budgets. You use information from those budgets to develop this budget.

### Exercise for Art Craft Pottery

Step 1 is to calculate the unit product cost using the budgets above.

Direct materials: Cost of Clay = \$3; Cost of Color = \$0.20

Cost of Direct Materials = \$3.20

Direct Labor: 0.12 hr @ \$10 = \$1.20

Overhead: Variable: 0.12 @ \$5 = 0.60

Fixed: 0.12 @ \$9.59* = 1.15

Total Unit Cost = \$3.20 (Direct Materials) + \$1.20 (Direct Labor) + \$1.75 (Overhead) = \$6.15 per unit

*Budgeted Fixed Overhead/Budgeted Direct Labor Hrs = \$6,580/686.4 = \$9.59

### Ending Finished Goods Inventory Budget for Art Craft Pottery

Pottery 200 units

Unit Cost X\$6.95

Total Ending Inventory =\$1,390