Expenditure

Expenditure

Once the Sales budget has been agreed, the costs of the business need to determined.

Fixed Costs

Firstly, determine the fixed costs within the business i.e. those which must be paid no matter what sales are made. Examples are:

Variable Costs

Variable costs i.e. those that will be incurred in line with the volume of sales. Examples are:

By separating out the fixed and variable costs the business can calculate the break even position for sales. The calculation is:

Break-even = Fixed Costs / (Sales - Variable costs)