Program Budgets - Budgetary Control, Cost Accounting Video Lecture | Cost Accounting - B Com

program budgets where do we start many
of you are asking about how do i price
my program for our program plans that
are due next week let's think about a
few things first we want to consider
what the purpose of our pricing is for
is it for one to recover your cost two
to create new resources let's link
profit centers we are creating a new
source of income here to establish value
to influence behavior it is important
oftentimes to tie price to a particular
program to ensure that your participants
are going to be committed to the program
to promote efficiency obviously we
talked about a good manager is efficient
with the resources that we have
available and to promote equity and we
see this when we have to take in direct
cost and disperse them amongst many
programs or if we have a program that
continually doesn't make us a lot of
money but we know we need to offer it
for the benefit of our community our
facility the population that we're
trying to serve approaches to
establishing price we can arbitrarily
price something just go out there and
pick a price for it we can do
competitive pricing basically what are
our competitors doing we might come in a
little bit beneath on to insure
participants market pricing so if yoga
is going for $10 a class you probably
need to stay in the markets rather than
having a $30 yoga class unless you have
something to offer for $30 and then cost
recovery pricing we see this typically
in our nonprofit sector that we
basically need to price that so that we
can recover all of our cost not
necessarily make a profit in
establishing a price we have to one
determine pricing variables to determine
the cost of one unit of production and
three if there is one we have to
determine the subsidy rate again typical
in our nonprofit our government entities
let's remind ourselves of fixed and
variable cost fixed costs are the
financial cost that the organization
encourage a regardless of the status of
the program unavoidable cost costs
remains steady regardless of volume
maintenance salary staffed your
mortgage it could be your marketing
costs your facility fee it's the same no
matter how many participants you have
variable cost
they are resulting from the actual
operation of the program or the service
they change directly and proportionally
those changes in volume typically more
the services offered the higher the
variable costs this includes our
supplies our t-shirts our equipment when
we think of variable cost next we have
to determine one unit of production so
this is per person per hour per class
per day we are looking at determining
the cost of the unit by taking the fixed
and variable cost adding them together
and dividing by the number now the
number could be the demand the number of
units the number of teams and number of
participants we want to base it on the
minimum number of people we need to run
the program next we have a break-even
example and we're gonna use a climbing
tournament for this break-even example
first I established all my fixed cost so
we have prizes here first place second
place third place the cost involved with
the prices the equipment and supplies
and the marketing that's not going to
change based on the number of
participants total fixed costs two
thousand six hundred and fifty dollars
my only variable cost here is the
t-shirts per person there are seven
dollars per person so we start we need a
minimum of ten people to do this
tournament we put in our fixed cost
which is going to be the same regardless
of the amount of people the variable
cost is going to fluctuate depending on
the number of people so then we have our
total cost and we have to divide it by
the number of participants so ten here
and then you can see as we go along with
the different levels twenty the price
goes down significantly and then as we
continue along thirty forty fifty we're
going to notice that the price goes down
significantly again this is just a
simple example of how we would come up
with our cost per participant for this
climbing tournament