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Estimated Costs Of A Budget
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The estimated costs of a budget breakdown are substantiated and an indication is given of how the required to figure was calculated.
Expenditure must be estimated in terms of both quantities used and prices paid. There is no doubt that a list of possible activities and costs may appear to be endless. Ask every relevant department and colleague about the probable quantities needed, prices payable and total amounts for all the different possible costs. Remember to allow for the impact of inflation on these estimated costs. Although all the estimates will largely be based on past budgets, your imagination will play a significant part.
Let’s look at the different types of expenditure:
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TYPES OF EXPENDITURE |
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Type |
Examples |
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On-going Specific Costs |
Raw material and component parts, bought-in services, goods for resale, labour and wages, after-sales support and service. |
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On-going Shared Costs |
Rent, rates, utilities, insurance, repairs, infrastructure, finance charges, postage, stationery, advertising, telephone, transport and professional fees. |
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One-off Start-up Costs |
Drawings, pre-trading items, set-up costs, specifications, production lines, sales and marketing literature and employment and retraining costs. |
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One-off Capital Non-Revenue Costs |
Tangible assets such as buildings, plant and equipment, office machinery, fixtures, fittings, motor cars and intangible assets such as goodwill, brands and intellectual property. |
Remember to check the previous year’s expenditure to prevent omitting costs from this year’s budget. It is also important to remind yourself that not everything in a budget has to be spent.