Hello friends and welcome to my article in the SLC: S21/W4 in this great theme i would be sharing my thoughts as regarding the quest.
Budgeting is an ideal financial term we all must know, most people relating budgeting to allocating a specified amount for a particular enterprise. Budgeting goes beyond that, it is the absolute process of creating a financial plan, spanning across only amount to all required approach towards achieving success in business over a given period of time.
Budgeting covers the expected income, expenses, savings and other special parameters which would duly enhance success in business. This financial concept aids in planning for the future of the business, ensuring financial growth through curtailing expenses, cutting cost and a host of other approaches towards attaining financial freedom.
Conversely, costing is the process of determining the actual worth of practicing, starting up a project, or business. Importantly, tracks the records of direct Cost and miscellaneous expenses incurred on your business making the business owner ascertain whether profits is obtained or loss incurred.
Relationship between costing and budgeting is thus;
Decision making is crucial in business thus the relationship between costing and budgeting is that it makes the entrepreneur take bold steps after analysis properly made. It aids the entrepreneur analyse the business properly and basically come up with quality decisions which prompt such individual to taking bold decisive step in business, spotting areas of improvement and adequate enhancement.
Costing monitors great business goals, paced by the business owner to achieving profits through balancing the business goals with budgets on the other hands set off virtual costs, financial targets to be achieved which are not yet seen.
The costing is a big prerequisite needed for budgeting, to take place, without the adequate costing put in place, harnesses there would definitely be little or no progress in business. Costing data is relevant for spotting good areas for budgeting thus making profits in business.
There are special importance of budgeting in determining cost too which I would be highlighting here.
Curtailing Cost;
Budgeting is a prerequisite in control of cost in business. It aids in addressing differences in actual cost and budgeting. It is a yardstick to guard against expenses in business too.
Instrument for Decision Making:
Provides a clear picture of expected cost of business, enabling brilliant decision making in business. These budgeting strategies can promote business profitability and success in business.
Conservation of Resources;
Budgeting curtails flamboyant spending and enhances conservative spending, following the financial allocation of resources. Proper funding of specified areas in business to ensure profits after these processes are done.
Wise Spending;
The budgeting ensures that all costs and expenses are done within concise financial strength, preventing outrageous spending, thus delivering wise spending and profit Maximization on the long run in business
| Ingredients | Amount |
|---|---|
| Eggs | 300 |
| Margarine | 500 |
| Icing & Decoration | 700 |
| Flour | 400 |
| Sugar | 200 |
| Total Ingredient | 2100 |
Labor Cost: Kneading of dough and baking ( 3 hours 400/hr) = 1200
Overhead Cost;
| Items | Amount |
|---|---|
| Electricity | 3000 |
| Equipment Maintenance | 2000 |
| Packaging & Delivery | 1000 |
| Total Overhead | 7000 |
Total Cost ( Before Adjustment)
Ingredients+Labor+Overhead= 4000+3000+3000= 10000
For 4% adjustment= 10000 × 0.04= 400
Adjustment Total Cost= 10000+400= 10400
Summary
| Ingredient | 4000 |
|---|---|
| Labor | 3000 |
| Overhead | 3000 |
| Adjustment | 400 |
| Total Budget | 10400 |
We ensured all budgets are accounted for during the cake preparation.
| Materials Cost | Amount |
|---|---|
| Edge control, Relaxer, Gel, Spotting Waves | 7500 |
| Stretcher, Comb, Dread Foam, Clipper, Hot Comb | 5000 |
| Miscellaneous Accessories, gloves, towel, shower cap | 3000 |
| Total Cost | 15500 |
Labor Cost:
Hairdressers time (3 hours 800/hr)= 2400
Total labor cost =2400
Overhead Cost:
| Booking and Advertisement banner | 1000 |
|---|---|
| Rent/Utilities per client | 2000 |
| Total Overhead | 3000 |
Total Cost before adjustment
Material + Labor +Overhead = 15500+2400+3000= 20900
After 3% adjustment
20900 × 0.04 = 836
Total Cost = 20900+836 = 21,736
Summary of Final Budget
| Material | 15500 |
|---|---|
| Labor | 2400 |
| Overhead | 3000 |
| Adjustment | 836 |
| Total | 21736 |
We anticipated the increase and it was evidently seen as shown by 3% adjustment