Hello Everyone
This is @max-pro from, #Bangladesh
Assalamu Alaikum friends hope you all are well. By the grace of God I am also well. Today I am back to participate in this wonderful SLC | S21W4 | Costos para emprendedores - Presupuestos, Learning Engagement Competition organized by our teacher @yolvijrm & @adeljose. Here are some questions that I will try to answer correctly. So let's begin.
| What is budgeting and how does it relate to costing? |
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According to me, a budget is a written or mental list of planned income and expenditure for a given period of time. It is used for individuals, families, organizations or governments. The main objective of budgeting is to ensure proper utilization of available resources and avoid unnecessary expenditure.
| Basic Components of Budget |
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| Income | Source of gross receipts such as salary, business profits or any other income. |
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| Expenditure | Expenditure on specific sectors from income like food, education, travel, debt repayment etc. |
| Savings | The difference between income and expenditure that is saved for the future. |
| Relationship between budget and cost accounting |
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Planning :- The budget gives a predetermined structure of expenditure. It serves as a benchmark in cost accounting.
Control :- Budget helps to control expenditure. Ensures expenditure in essential sectors by reducing unnecessary expenditure.
Comparison :- Expenditure accounts are compared with the budget to understand where overspends or underspends have occurred.
Opportunities for Savings :- Budgeting creates opportunities for savings by reducing expenditure through cost accounting.
Accountability :- Accurate budgeting and cost accounting ensure financial discipline of an individual or organization.
Let me show you as an example. Suppose if you earn bdt 30,000 per month and plan to spend bdt 20,000 in the budget, make sure that your expenses stay within the budget with an expense account. Budgeting and expense accounts work together to help you reach your financial goals more easily.
| Explain the importance of budgeting in determining costs. |
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Budgeting is very important in determining expenses because it creates a planned framework that helps meet personal, family or organization's financial goals. Budgeting ensures financial discipline by setting expenditure limits and helps reduce unnecessary expenditure. Hence the importance of budgeting is planning and prioritization of expenditure. Budget helps you to identify different sectors of expenditure and decide how much should be spent in which sector. This allows you to allocate enough money for important sectors such as education, health or debt repayment. Also mentioned below.
Unnecessary Cost Control :- By creating a budget, you can see which sectors are incurring unnecessary expenses. This creates opportunities for savings by reducing costs and ensures optimal use of your income.
Creation of savings opportunities :- A budget sets spending limits and leaves a certain portion for savings. It helps to save money for future which is useful for emergency situations or big projects.
Financial discipline :- Budgeting teaches you a discipline in spending. This ensures that you don't overspend and are less likely to go into debt.
Goal setting and achievement :- A budget provides an outline of spending that helps you achieve specific financial goals. For example, buying a new car or saving for education.
Cost Analysis and Decision Making :- Budgeting allows you to analyze costs. Through this you will understand which sector needs to increase or decrease the cost and can take the right decision accordingly.
| Example |
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If your monthly income is bdt and you create a budget where bdt 15,000 is allocated for essentials (eg food, house rent) and bdt 5,000 for savings, then only bdt 5,000 will be left for non-essential expenses. This limit will control your spending and help you save money for the future.
| Prepare the budget as explained, for the preparation of cakes. Consider a 4% adjustment. |
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A budget is prepared for making the cake. For example, budget analysis for manufacturing a 1 kg cake. Below is a table of materials required, their quantities and costs. Budget is prepared considering indirect cost and direct cost.
| Step 1 :- Consider Direct Costs |
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| Materials | required amount | Price per unit (BDT) | Total Cost (BDT) |
|---|---|---|---|
| flour | 500 grams | 50 per kg | ২৫ |
| the egg | 4 | 10 per piece | 40 |
| sugar | 300 grams | 60 per kg | 18 |
| Baking powder | 10 grams | 400 per kg | 4 |
| Vanilla essence | 10 ml | 100 per 10 ml | 10 |
| butter | 100 grams | 500 per kg | 50 |
| cake box | 1 | 30 | 30 |
| Step 2 :- Consider Indirect Costs |
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Indirect Costs :
Gas and Electricity (estimate): 10 BDT per cake
Repair and maintenance of baking equipment: 5 bdt per cake
Total Indirect Cost = 15 BDT
| Step 3 :- Adding Adjustments (4%) |
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Total cost adding direct and indirect costs:
177 + 15 = 192 BDT
For 4% adjustment :- 192 × 1.04 = 199.7 BDT
| This is practical math |
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| Step 4 :- Determine Selling Price |
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The minimum selling price of a cake including profit will be determined as:
Suggested Sale Price : 250 BDT
| Equivalent to current STEEM price |
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If the current price of STEEM is 20 BDT
250 ÷ 25 = 12.5 STEEM
So, the price of Steem for selling one kg of cake can be 12.5 STEEM.
| Prepare the budget as explained, for the hairdressing service. Consider a 3% adjustment. |
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Budget for hairdressing services & Below are the costs of materials and services directly used during hairdressing.
| Step 1 :- Consider Direct Costs |
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| Materials/Services | Quantity Required | Price per unit (BDT) | Total Cost (BDT) |
|---|---|---|---|
| Shampoo | 30 ml | 500 per 1 liter | 15 |
| Conditioner | 20 ml | 600 per 1 liter | 12 |
| Hair cutting blade | 1 | 100 per piece | 100 |
| Hair cutting cloth and towel | 1 set | 50 per set | 50 |
| Step 2 : Consider Indirect Costs |
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Indirect costs highlight the additional cost of hairdressing services.
| Indirect Costs | Cost (BDT) |
|---|---|
| Electricity (for hair clippers) | 20 |
| Equipment maintenance | 15 |
| Rent and general expenses | 30 |
| Step 3 : Add Total Cost and Add 3% Adjustment |
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Total Cost = Direct Cost + Indirect Cost
= 177 + 65 = 242 BDT
For 3% adjustment :
242 × 1.03 = 249.26 BDT
≈ 249 BDT
| This is practical math |
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| Step 4 : Determine Selling Price |
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Minimum selling price of a hairdressing service with profit:
300 BDT (Additional 20% for profit)
Pricing of Services on Steem, Suppose the current price of Steem is 20 BDT:
So, the Steem price for this hairdressing service will be 15 Steem.
Costing and budgeting are of immense importance for entrepreneurs. Budgeting doesn't just stop at determining expected expenses. It makes the overall management of the business efficient and profitable. By accurately identifying direct costs and indirect costs of materials and labor and setting a minimum price, an entrepreneur can make his business sustainable.
For example, in the case of cake making or hairdressing services, it is possible to set the price in line with the market demand by creating a proper budget. After all, a well-structured budget lays the foundation for the enterprise's profitability and future expansion.
So I am Inviting my lovely Steemian friends @patjewell, @irawandedy, @shohana1 to Participate in this Competition.