The town hall program aims to solve the problem of juvenile delinquency. The costs that are expected include the rental fees for a commercial center, the expenses of hiring trainers and administrative staff, the cost of purchasing equipment, and marketing costs. To come up with the total annual budget estimate, I implemented the cost risk model approach. I identified all the direct costs involved in renting the commercial building, which included the rental fees, utility bills, maintenance costs, labor costs, and salaries to the cleaning and security staff. After computing these costs, the total direct costs summed up to $110, 464. I then computed the risk and liability cost, which consisted of the insurance fees in case the building is subjected to damage during the leasing period. In addition, the health insurance of the cleaning and security personnel added up to the liability costs. According to Hellman (2021), intangible costs are those expenses that can be identified but are difficult to quantify, such as loss of morale. The intangible costs in this phase comprised of delays in paying the security officers and the cleaning staff. The delayed salaries would decrease their morale, and the activities of the town hall program could be disrupted. The total estimated cost in phase A summed up to $117,940.
The next phase comprised of the purchasing the equipment cost. The direct costs in this phase were divided into fixed and variable costs. Fixed costs are charges that must be paid by the organization without considering the type of business activities. (An et al., 2020). The fixed costs covered the purchasing costs of the equipment, while the variable costs were made up by the transportation expenses. Examples of fixed costs include salaries, insurance, and rental fees (Abraham et al., 2021). I came up with the cost estimate by first identifying the cost of each piece of equipment and multiplying it by the number of pieces required at the activity center. The equipment to be bought include wireless microphones, a grand piano, a drum set, speakers, and cameras. I then computed the risk and liability costs, which included the indemnity of the equipment against theft. The estimate for the insurance was $4,500 per month. I arrived at this figure by insuring 2% of the total cost of the equipment every month. The intangible costs included the defects that could be found in the purchased equipment and the time it takes to deliver the instruments to the activity center (Ma & Ren, 2018). I found the total estimated annual cost for phase B at $298,810.
Phase C computed the costs that will be incurred when hiring the trainers and administrative staff to manage the center. There will be trainers for the music, drawing, modelling, and dancing groups. Moreover, the administrative staff will comprise of the chairperson, vice-chairperson, secretary, and treasurer. All these personnel will be paid on a monthly basis, and thus their salaries will be fixed costs. Furthermore, these employees will receive lunch and transport allowances. A liability risk is a weakness that may expose a party to liability for specific sorts of losses (Zhong et al., 2021). Therefore, risks and liabilities in this phase will comprise of the employees’ health insurance fees. Intangible costs will arise when their salaries take long before being paid. This will demotivate them and lower their productivity. The total annual estimated cost summed up to $1,546,560 in this phase.
The last phase comprised of the marketing costs. These are the advertising costs to ensure that awareness of the program is aired through various channels. The advertisements could be through radio stations, television channels, newspapers, or social media channels. Before calculating the annual expenses, I first computed the cost of advertising the program every month. For instance, the cost of advertising the program on television is estimated to be $50,000 per month. The intangible costs in this phase will be incurred if the advertisements fail to reach the intended audience. As I conclude, the estimated total annual cost for this project will be $2,785,730.
References
Abraham, F., Bormans, Y., Konings, J., & Roeger, W. (2021). Price-cost margins and fixed costs. CEPR Discussion Paper. Web.
An, Q., Wang, P., Emrouznejad, A., & Hu, J. (2020). Fixed cost allocation based on the principle of efficiency invariance in two-stage systems. European Journal of Operational Research, 283(2), 662-675.
Hellman, N. (2021). Discussion of ‘Accounting for intangible assets: suggested solutions. Accounting and Business Research, 1-10.
Ma, J., & Ren, H. (2018). The impact of variable cost on a dynamic Cournot–Stackelberg game with two decision-making stages. Communications in Nonlinear Science and Numerical Simulation, 62, 184-201.
Zhong, H., Lin, Y., & Yip, T. L. (2021). A quantitative liability risk assessment of oil spills in oil ports: the case of the Guangdong-Hong Kong-Macao Greater Bay Area. Maritime Policy & Management, 1-19.