Financial Management for Nonprofit Organizations by John Zietlow & Jo Ann Hankin & Alan Seidner & Timothy O’Brien

Author:John Zietlow & Jo Ann Hankin & Alan Seidner & Timothy O’Brien
Language: eng
Format: epub
ISBN: 9781119382591
Publisher: Wiley
Published: 2018-04-16T00:00:00+00:00

What is the relevance of these cost types to expense budgeting? We have already noted that a budget is a plan. When laying out the planned expenses, our method is simple:

State expected level of activity (number of units of items produced or delivered).

Then estimate how much the costs will be based on this activity level, so that the budgeted amount accurately reflects whether this item is a variable, semivariable, or fixed cost. Overhead costs are especially important to estimate if your budget development is in support of a grant proposal.29

This whole process takes on added importance when doing flexible budgeting, because in that method of budgeting one must calculate the amount of each expense element for various levels of activity – not just the “most likely” or projected level of activity (see Section 8.6).

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