Controlling Costs and Budgets

... (P4) Costs and Budgets (P4) Introduction: This report was produced by undertaking research into why costs and budgets need to be controlled in order to be a successful business. One of the key responsibilities is to manage budgets and costs and ensure that it makes a positive financial contribution to the business. Business Costs Different kinds of finance are used to cover different business costs. 1. Start-up costs are financed by start-up capital. 2. Running and renewal costs are financed by working capital. 3. Expansion costs are financed by investment. 1) Start-up costs: costs of buying a first stock of materials, equipment, e.g. computers, machines and purchase of premises. 2) Running costs: regular costs of producing goods or services, e.g. wages, insurance, electricity, materials, rent for premises and machinery. 3) Investment/Expansion costs: costs of installing more production lines, employing new staff, opening new premises, developing a new product etc. Businesses can divide general running costs in Fixed and Variable Costs. * Fixed costs

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