SLC | S21W4 | Costs for entrepreneurs - Estimated costs

Assalam-o-Alaikum

First of all I want to thank the steemit blog for choosing the best teachers for season 21 and these teachers have worked hard and dedicated to bring us the best of the best questions in the fourth week of season 21 that we've had a good time with. Best among other teachers who try to perform well @yolvijrm SLC | S21W4 | Costs for entrepreneurs - Estimated costs

            Canva designing

What is the budget and what is its relationship with the calculation of costs?

Some Information on the Budget and Its Connection with Cost Determination

A budget is a planned statement of income and expenditure for a definite period of time in the future. They act as a reference tool for enabler resource management, providing financial sustainability, and achieving organisational or personal objectives. Budgets are required in different areas, including business, administration, home management, and even an individual. Obviously, they are involved in planning, controlling, and evaluation of financial activities, thereby giving a clear picture on where resources should be bunked.

A budget is defined in various ways and this aspect lays much emphasis on the linkage between budget and cost. Cost buildup entails the assessment of all expenditure costs attributable to the manufacturing of goods or provision of services, or undertaking of activities. Such costs comprise direct costs for materials, equipment and labour as well as indirect costs for example for energy and general administration. Budgeting is simple but realistic cost estimating is basic to proper budget preparation.

Budget and cost calculation and their relationship

1. Foundation for Budget Planning:

Cost calculation gives informations relevant to the creation of a budget. By identifying the real cost of business operations or specific project, it becomes easier to either fund it adequately or otherwise it becomes easier to overemphasize the cost and fail to meet project requirements.’

2. Resource Allocation:

That budget guarantees that the resources have to be used according to the calculated costs. For instance, in a manufacturing business structure, bulk of the budget will be spent on commodities, equipment and labor in order to ensure constant production.

3. Expense Monitoring:

A budget, therefore, serves as a standard rate against which control can be exercised regarding expenditure. Everytime actual costs are different from calculated costs, it forces a check for operational inefficiencies or some unseen complications.

4. Decision-Making:

Commitment impacts decisions within a budget since cost calculations are imperative to budget decisions. For instance, cost control if the budget reveals excessive spending in a specific area wouldn’t be a problem because managers can always adjust resource allocation or plans to fit the preset budget.

5. Profitability and Sustainability:
Profitability is achieved when budget has been effectively prepared, by relating reasonable costs with foreseen earnings. It also acts as a pro-sustainability model since it helps in avoiding over expenditure and operational loss.

Therefore it is quite clear that budgeting and cost calculation are interrelated since one supports the other in functioning. While cost calculation forms a basis for a good cost budgeting, a budget on the other hand gives a structure to the management of those costs. It guarantees optimal usage of resources and organisational financial profitability.

freepik

Explain the importance of budget in determining costs.

The Role of Budget in Estimating Cost

A budget is an essential part of people’s financial planning where it is used by people in their daily lives, companies as well as organizations. It not only predicts revenue generation but also gives approximations of expenses for the organization’s smooth running and financial planning. Below are some key points highlighting the importance of a budget in determining costs:

---

1. Accurate Cost Estimation

A well thought-through budget is a valuable tool for the over-accurate cost forecasting and helps subtitle expenses. This contributes to the recognition of direct costs related to items such as materials and people, as well as more general overheads like lighting and salaries of support staff respectively. Estimations help in avoiding additional costs by making certain there is money prepared to meet the planned for activities.

---

2. Resource Allocation

A budget is a tool that divides resource expenditure by departments, projects, and activities according to their needs and costs. Since costs are determined beforehand, money is used rightly on necessary aspects leaving out non-needed expenses.

---

3. Financial Control

Autonomous control takes place through budgeting since it puts in place spending barriers. Managing and comparing actual expenditures with estimated ones guarantees that costs will not go much higher. It reduces extravagance and shows where economies might be achieved, which is this discipline.

---

• 1. It can be noted that profitability and cost efficiency are important areas at Telekom Malaysia with key measures that include Gross Profitability, Gross Profit Margin, Cost of Operations and Operational Cost.

Using a budget allows business to look at the causal link between the amount spent and the amount received. Areas and products consuming high costs can be targeted for making further efforts of reducing costs or engaging in negotiations for better rates with the suppliers. This not only increases the profit level, but also optimizes the operation performance.

---

5. Decision making and strategic planning

Budgets help assuming the basic role of a financial reference point for managers to make and plan decisions. This is important since when costs are clearly defined, firms can make a choice whether to increase operations, fund these projects or reduce on some activities. This strategic planning leads to sustainable development or long term success.

---

6. Risk Management

Budgeting also caters for operations considerations in a case where emergencies arise that may cause set back in performances of organizations. Future costs control lowers financial risks and fluctuations when the business faces unexpected situations.

Budget is a vital tool in the assessment of the costs because it provides a framework within which planning, resource acquisition and control occur. JO, people and companies will be able to implement affordable processes in order to meet definite objectives as well as prevent overspending half life.

freepik

Realize the budget as explained, for the preparation of pastels. Consider an adjustment of 4%.

Budget for Preparing Pastels with 4 % Adjustment

Pastels are sweet pastries that give you a delightful snack with the help of enclosed savory fillings and a layer of pastry dough. Following is a detailed budget that takes into consideration of a contingency of 4% in the price of an ingredient or any other odd expenses.

---

List of all the raw materials used and approximate costs if not adjusted (i)

Total Cost (Before Adjustment): PKR 1,090

---

4% Adjustment for Flexibility

To account for possible price increases, we add a 4% buffer to the total budget:
Adjustment Calculation:

After rounding off, the adjusted budget becomes:
1,090 + 44 = PKR 1,134

Explanation of Costs

1. Major Ingredients:

They use flour and oil in the making of the dough. The adjusted prices allow if the prices do rise somewhat that you can continue to acquire good quality.

Chicken and cheese are essential for the filling so you can make your recipe full of nutrients and tasty.

2. Seasonings and Vegetables:

Flavor is added by the addition of onions, spices and green chili. These are relatively inexpensive however, essential for taste.

3. Optional Ingredients:

Cheese is not necessary but tasty – polyose is added to the preparation of the dough for the pie and can be shaved to add a richer taste to the pie.

4. Miscellaneous Costs:

Wrapping sheets of paper and cooking gas are important to prevent hitches and make sure a meal is well presented.

The actual cost incurred in preparing 20 pastels with a variance of PKR 14 from the adjusted budget is PKR 11,34 hence have incorporated room for slight changes in the actual prices of the raw materials. This integrated method makes it possible to prepare successfully without a compromise on taste and appearance.

freepik

Realize the budget as explained, for the hairdressing service. Consider an adjustment of 3%.

Implementing a Budget for Hairdressing Services with a 3% Variation

Thus, budgeting here is central to the operation and performance of a hairdressing service. Through this detailed guide, financial stability is also achieved together with the fact that will conform to the 3% adjustment on operation costs. Below, the reader will find the budget as it was developed at the beginning of the period, and the actual numbers.

• 1. Components of the Hairdressing Service Budget Explained

A hairdressing service typically requires allocation for the following:

Rent and Utilities: Will look at expenses associated with rent of the salon floor space and other monthly overheads.

Products and Supplies: Membership is with the shampoo, conditioner, hair color as well as the hair care tools such as blow dryers among others.

Staff Salaries: Salaries of a business’ hairstylists and other subordinate employees.

Marketing: Websites, Advertisements and promotions.

Miscellaneous Expenses: Small contingencies or incidental expenses or minor purchases.

• 1. Original Budgetary Estimates and dollar amounts.

Here is a detailed table showcasing the original budget and the 3% adjustment:

• 1. Explanation of Adjustments

The & 3 % adjustment may include inflation, increased operating expenses or better services. The slight increments in each category help the salon guarantee quality services without blowing the budget.

Rent and Utilities: This small rise helps the company to pay their bills on time despite the prevalent high rates of utility.

Products and Supplies: Updated inventory for improved results for the clients.

Staff Salaries: Rewards the employees’ hard work and contributes towards staff maintenance and management of talented professionals in this field.

Marketing: Supports creative marketing to secure more customers among people.

Miscellaneous Expenses: Helps to set up an emergency fund in case of any other eventualities cropping up.

Conclusion

An optimised budget, relevant for the today functioning of a hairdressing service, is a set of regular and one-off measurements, which is spent under a definite plan. In the table, there is a reasonable 3% change which can be viewed as financial viability but never at the cost of quality and employees. This way shall expand the business in the right manner for the business to be sustainable.

I would like to invite @patjewell @wilmer1988 @stef1 to take part in this contest

Regard For me @shabbir86