| | January | February | March | Units to be Manufactured
| 50 | 75 | 70 | Material A @ £5 per Unit
| £250
(50 x £5)
| £375
(75 x £5)
| £350
(70 x £5)
| Material B @ £2 per Unit
| £100
(50 x £2)
| £150
(75 x £2)
| £140
(70 x £2)
| Material C @ £3 per Unit
| £150
(50 x £3)
| £225
(75 x £3)
| £210
(70 x £3)
| Total
| £500
| £750
| £700
|
The Staff budget will compensate for the proposed staff costs during the budget period. Once you have determined how much staff you will need for the operations of the business, the staff costs can then be budgeted as follows:
(£)
| January | February | March | | Pay (Before Tax) | 10,000 | 12,000 | 10,000 | | National Insurance | 1000 | 1150 | 1000 | | Pension Payments | 750 | 860 | 750 |
If you employ part time workers, it may be that you will not need them as intensively during certain months: this will be reflected through reduced staff costs for that particular month(s).
If you are a manufacturing business, it may be that your overheads will be a small amount of the total proportion of costs. If your business is a service, it is likely that overheads will contribute a high proportion towards total costs.
The overheads budget can be compiled in two ways: either by allocating a proportion of the overheads to each product/service (if you have more than one), or keep the overheads as a single budget.
6. The Capital Expenditure Budget
If after compiling the production budget and sales budget, it may be necessary to purchase or hire machinery due to the lack of resources to meet demand at a particular time. In which case, it is vital that you budget for purchasing/hiring such equipment so that you can arrange finance in good time if need be.
For example,
(£)
| January | February | March | | Purchase Equipment A | 1000 | - | - | | Hire Equipment B | - | 100 | 100 |
In the example above, it may be necessary to take out a loan (or an overdraft) at the beginning of January, or even December, so that you can purchase equipment A. Likewise, the same could be done for the months February and March, but it is more feasible that an overdraft would provide a solution if your bank balance could not compensate for the monthly hire fee.
Article Index
4 Staff and Capital Expenditure Budget | 
