SLC | S21W4 | Costs for Entrepreneurs - Budgets
It's the 4th week of Steemit Learning Challenge and I am pleased to participate in this week's lesson. I will present my homework using the questions given by the teachers as guideline;
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What is Budgeting and How Does it Relate to Costing
Budgeting is the process whereby financial plan are being set on how to allocate resources in order to know the expected expenses for production. With budget in business, you can set limits by spending money according to the business' priorities, achieve financial goals, get your spending awareness in check and also have this preparedness for unexpected expenses ( emergency fund).
Both budgeting and cost are related because they work together to yield good profit. I would say that; budgeting is the first step to financial planning in terms of the expenses while cost gives a detailed on that particular expenses on the budget list. Budgeting also gives an accurate cost and reveal costing data of raw materials when there is an inflation rate.
These two financial tools in business helps an entrepreneur to maximize profits, manage expenses and also achieve financial goals.
Importance of Budgeting in Determining Costs
Budgeting is an important part of business which helps the business owner to estimate and predict accurately during productions.
Budgeting is very important because it gives appropriate prices for each product after analysing the costs.
Every entrepreneur understands market strategies which is why it is important to apply costs through setting budgeting in order to achieve profits.
Costs related risks can easily be avoided when budget is already drafted out.
Costs can be controlled when there are set up budget for the future expense during productions. This helps an entrepreneur to focus on more important raw materials for that production.
Budget For Cake Preparation
Direct Cost for Cake Preparation
I will start by listing the direct cost required for the preparation of cakes based on estimated quantities and prices.
| Cost | Required for 1 Month | Unit Value | Amount |
|---|---|---|---|
| Flour | 10kg | 600 per kg | 6,000 |
| Sugar | 5kg | 400 per kg | 2,000 |
| Eggs | 60 units | 15 per egg | 900 |
| Butter | 5kg | 800 per kg | 4,000 |
| Cake Boxes | 50 units | 20 per box | 1,000 |
| Vanilla flavor | 0.5 litres | 2,000 per litre | 1,000 |
| Labour | 5 days | 10,000 per day | 50,000 |
| Total | - | - | 64,900 |
Indirect Costs of Cake Preparation
Assume the following indirect costs are associated with the preparation of cakes:
| Cost | Types of Cost | Amount |
|---|---|---|
| Oven and Equipments | Indirect | 25,000 |
| Gas | Indirect | 10,000 |
| Electricity | Indirect | 5,000 |
| Total | - | 40,000 |
Sum of all Costs
| Cost | Required for 50 Cakes | Unit Value | Total Amount |
|---|---|---|---|
| Flour | 10kg | 600 per kg | 6,000 |
| Sugar | 5kg | 400 per kg | 2,000 |
| Eggs | 60 units | 15 per egg | 900 |
| Butter | 5kg | 800 per kg | 4,000 |
| Cake Boxes | 50 units | 20 per box | 1,000 |
| Vanilla flavor | 0.5 litres | 2,000 per litres | 1,000 |
| Labour | 5days | 10,000 per day | 50,000 |
| Oven and Equipments | - | - | 25,000 |
| Gas | - | - | 10,000 |
| Electricity | - | - | 5,000 |
| Total | - | - | 104,900 |
Budget for Hairdressing Services
Direct Costs and Hourly Rate
Assuming the monthly salary for the hairdressing service is 400,000. A typical hairdresser works 160 hours per month.
Indirect Cost for Hairdressing service
| Cost | Type of Cost | Amount |
|---|---|---|
| Rent | Indirect | 50,000 |
| Tools and Equipment | Indirect | 30,000 |
| Shampoo and Supplies | Indirect | 10,000 |
| Advertising | Indirect | 10,000 |
| Total | - | 100,000 |
Prorating Indirect Cost
Total Cost Per Hour
I will invite @eliany, @ruthjoe and @suboohi to join the entrepreneurial class.