Hello 🤗 guys,
I welcome you all to the Steemit Learning Challenge season 21 week 4 on a contest organised by @yolvijrm & @adeljose which talks about Costs for entrepreneurs - Budgets. I'm going to be sharing my understanding on the said topic below as I try to attempt all the questions below.

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What is budgeting and how does it relate to costing?

In other to properly know how budgeting is related to costing, one must firstly know what budgeting and costing is all about. So in this article I will explain them as they are both financial practices though they are different when it comes to their main purpose. So these article will help us to get it better.

Now let's define budgeting and costing separately so that we can know how they are related from the definition and also we can spot the difference between them as well.

Budgeting as the name implies is a process where we plan, allocate resources for a given purpose within a range of time. This means that a budget deals with plan, allocation of resources within a period.

A budget has to do with estimation of income or revenue generated, putting a limit on spending or allocating money accordingly to different units and lastly monitoring the allocated money to be sure that it is used accordingly and also make adjustment if possible.

This shows that the main aim of budgeting is to enable traders or business owners have a roadmap of what they intend to achieve with the available funds and also avoid unnecessary spending as everything needed has been kept into record and money allocated to it is kept intact to run the it.

Costing on the other hand has to do with the identification and calculation of the total expenses which is incurred during a production of goods and services. This means that all form of cost incurred during a production must be taken into proper consideration.

Recall we talked about the various type of cost which include the direct cost and indirect cost. Also we look at the contribution of the various cost with regards to the expenses incurred in the production and then make decision there.

With the help of costing, prices of the goods and services are determined easily as the record of all cost be it direct or indirect are taken into consideration and then a price tag is given to the product or service after ensuring that the product is in profit.

Relationship Between Budgeting and Costing

Input for Budgeting: Since costing provide the data for expenses, this goes a long way to help in preparing budget. Without the expenses which is cost directly or indirectly budget can not be properly prepared since we don't have details of the record needed for the preparation.

Monitoring and Control: With the help of costing, when we want to carry out a budget plan, one can properly check if the actual expenses is in line with the budget made and this is to see if the budget covered the cost appropriately.

Pricing and Profitability: With a budget, the goals set are always worked towards because a roadmap has been made whereas costing is done to ensure that an appropriate amount is given to the product so that the business makes it profit after removing all expenses.

Decision-Making: Budgeting and costing enable traders to make a better decision as they have taken into consideration all that is needed to achieve their goal and target and also grow well.

Explain the importance of budgeting in determining costs.

There are many importance of budgeting when it comes to determining cost and I will be discussing a few of them below. So let's check them and also a little explanation on them.

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Forecasting Costs: One of the major importance of budgeting in determining cost that it aids organisation or individuals to allocate resources accordingly since they have taken into consideration everything associated with it.

Cost Allocation: With the help of budgeting, cost is properly allocated to different departments and every form of cost is captured and included in the price of production.

Setting Spending Limits: With the help of spending limit, budget are set to avoid overspending. This means that resources are evenly distributed at the right proportion.

Improving Decision-Making: With the help of budgeting, decision making are made effectively. Take for instance a budget is made and an area where some money has been assigned in the budget which is crucial later needed more funds. To effectively cover this, an area with less important will be delayed and the funds be used to solve for area that is more important.

Achieving Profitability: The main target of a budget is to achieve profitability and that is why the business running is planned via budgeting from the very beginning. Here the essence is to ensure that after every expenses the organisation has something as a profit.

Prepare the budget as explained, for the preparation of cakes. Consider a 4% adjustment.

To effectively prepare a budget for a cake and also consider a 4% adjustment we may want to look at it via Ingredients (Per Cake), Labor Costs, Utilities, Overheads (Packaging, Maintenance, etc.). These gives you the overall information with regards to cake preparation.

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Budget for Cake Preparation

Lets consider them one after the other starting from the first listed above.

Ingredients (Per Cake)

The ingredients needed and their quantity as well as cost per unit and an assumed cost in USD and it's equivalent in Steem can be seen in the table below.

Ingredient	Quantity per Cake	Cost per Unit	Total Cost (USD)	Steem
Flour	2kg	1/kg	2	6
Sugar	1 kg	0.5/kg	1	2
Butter	0.5 kg	2.00/kg	1	2
Eggs	6 pieces	0.5/egg	3	9
Milk	1 liter	2.00/liter	2.00	6
Baking Powder	100 g	1/100g	1	2
Total Ingredients Cost			$10.00	27

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Labor Costs
The labour needed for the production of the cake ingredients provided above also can be seen in the table below.

Task	Time Spent (hrs)	Rate per Hour	Total Cost (USD)	Steem
Mixing & Preparation	1.30 hour	10/hr	15.00	20
Baking	2 hour	10/hr	20.00	40
Total Labor Cost			$35.00	60

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Utilities

The utilities cost needed for this is also seen in the below table.

Utility	Estimated Usage per Cake	Cost per Unit	Total Cost (USD)	Steem
Electricity (Oven)	3 kWh	1/kWh	3	9
Water	10 liters	1/liter	10	20
Total Utilities Cost			$13	29

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Overheads (Packaging, Maintenance, etc.)

Here we look at other expenses such as the packaging and other necessary things that may not be visible at the moment.

Item	Cost per Cake (USD)	Steem
Packaging	$1	3
Miscellaneous	$1.5	5.5
Total Overheads Cost	$2.50	8.5

Total Cost Before Adjustment

Now let's bring all the cost incurred in the following tables listed above in a tabular form before we make the 4% adjustment.

Category	Total Cost (USD)	Total Cost (Steem)
Ingredients	$10.00	27
Labor	$35.00	60
Utilities	$13	29
Overheads	$2.50	8.5
Grand Total	$60.50	124.5

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4% Adjustment

• Adjustment Amount: $60.50 × 4% = $2.42
• Adjustment Steem Amount: 124.5 × 4% = 4.98
• Final Budgeted Cost per Cake in USD: $60.50 + $2.42 = $62.92
• Final Budgeted Cost per Cake in steem: 124.5 + 4.98 = 129.45

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Total cost budget for a per cake including the 4% adjustment is $62.92 so if you want to know the total budget for atleast 10 cakes then you multiple the amount i.e., $62.92 * 10 which will give you about $629.20

Prepare the budget as explained, for the hairdressing service. Consider a 3% adjustment.

To effectively prepare a budget for a hairdressing and also consider a 3% adjustment we may want to look at it via Labor Costs, Materials and Products, Utilities, Overheads. These gives you the overall information with regards to hairdressing service.

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Budget for Hairdressing Service

Lets consider them one after the other starting from the first listed above.

Labor Costs

Task	Time Spent (hrs)	Rate per Hour (USD)	Total Cost (USD)	Steem
Hair Washing	1	10.00	10	20
Hair Styling	1.50	20.00	30	60
Finishing Touch	0.5	5	5	10
Total Labor Cost			$35.00	90

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Materials and Products

Item	Quantity Used	Cost per Unit (USD)	Total Cost (USD)	Steem
Shampoo	50 ml	0.05/ml	2.50	5
Conditioner	30 ml	$0.05/ml	2.30	4.8
Styling Products (Gel, etc.)	10 ml	0.50/ml	3.00	9
Disposable Towels	1 unit	1.00/unit	2.00	5
Total Materials Cost			$9.80	23.8

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Utilities

Utility	Estimated Usage per hairdressing	Cost per Unit	Total Cost (USD)	Steem
Electricity (Tools/Lighting)	3 kWh	1/kWh	3	9
Water	10 liters	1/liter	10	20
Total Utilities Cost			$13	29

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Overheads

Item	Cost per hairdressing (USD)	Steem
Cleaning Supplies	$1	3
Miscellaneous	$1.5	5.5
Total Overheads Cost	$2.50	8.5

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Total Cost Before Adjustment

Category	Total Cost (USD)	Steem
Labor	$35.00	90
Materials	$9.80	23.8
Utilities	$13	29
Overheads	$2.50	8.5
Grand Total	$60.30	151.3

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3% Adjustment

• Adjustment Amount: $60.30 × 3% = $1.809
• Adjustment Steem Amount: 151.3 × 3% = 4.539
• Final Budgeted Cost per Service in USD: $60.30 + $1.809 = $62.109
• Final Budgeted Cost per Service in Steem: 151.3 + 4.539 = 155.839

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Total cost budget for a person hairdressing including the 3% adjustment is $62.109 so if you want to know the total budget for atleast 10 persons doing a hairdressing then you multiple the amount i.e., $62.109 * 10 which will give you about $621.09

I want to finally invite @josepha, @solaymann, and @suboohi to join the contest and share their entry if they haven't done so yet.

Cc:
@yolvijrm
@adeljose