Optimise-GB gives a presentation on Activity Based Costing (ABC) and Zero Based Costing (ZBB). These methods illustrates how ABC and ZBB can be used to calculate unit cots taking into account variable, semi-fixed and fixed costs by splitting the costs by usage, time, space and volume from scratch. This ensures that assumptions are not taken into account and factual costs are applied so that true margins may be derived. Thank you Simon Misiewicz

1. Zero Based Budgeting (ZBB) & Activity Based Costing (ABC) simple as 123... Optimise- GB

8. What are the types of costs that need to be considered? Optimise -GB

11. Calculating variable costs - Administration costs Through ABC and ZBB you identify the required activities and assign costs In other budgeting techniques you would roll the costs forward incrementally based on previous trends however this is not best practice Optimise -GB January February March Q1 Book keeping £500 £500 £500 £1,500 Marketing £1,000 £500 £0 £1,500 Stationery £250 £150 £100 £500 Admin costs £1,750 £1,150 £600 £3,500

12. Fixed costs Fixed costs are not linear to sales volumes. For instance the monthly rent of £30,000 will not change if sales double from the previous month. It may be argued that power is variable, but this is only true for manufacturing companies that utilise a substantial amount of power for their machines to function. Optimise -GB

14. Forming the Budget Through ABC and ZBB Optimise- GB January February March Q1 Revenue £30,000 £90,000 £120,000 £240,000 Staff costs £1,500 £3,000 £4,500 £9,500 PC costs £14,400 £43,200 £57,600 £115,200 Admin costs £1,750 £1,150 £600 £3,500 Power £1,000 £1,000 £1,000 £3,000 Rent £10,000 £10,000 £10,000 £30,000 Total Costs £28,650 £58,350 £73,700 £160,700 Profit £1,350 £31,650 £46,300 £79,300

15. You should now be able to create budgets using ABC and ZBB that reflect your business plans accurately Optimise- GB