A guide to third sector trading - WCVA

It’s an idea, but is it business? A guide to third sector trading
Appendix 1 Appendix 2 Appendix 3
Appendix 3: Calculating unit costs
Third sector trading organisations are often unfamiliar with the technicalities of costing bids and quotations for work.
This beginners’ guide indicates some of the key features and provides a work example.
A step by step guide for enterprises contracting
for services
1. Cost centres: Decide how the expenditure of your organisation
can be broken down into separate “cost centres”, identifying a
different cost centre for each distinct activity – eg:
• Cost Centre 1 – your local headquarters for general activities,
volunteering etc
• Cost Centre 2 – a care attendants scheme
• Cost Centre 3 – a day centre
• Cost Centre 4 – a grant-funded development project.
2. When you come to work out the unit costs of any activity, you
will carry out the calculation separately for each cost centre (project
or activity) which you are interested in.
3. Types of cost: Different types of costs need to be considered
in different ways, so it is important to understand some basic
distinctions:
• set up costs: the costs of starting a new project, including the
equipment purchased for it and staff time needed to plan and
launch it
• fixed direct costs: these are any facilities used which do not
change with the level of the service you provide (eg a minibus
which you use to run a day care centre)
• variable direct costs: these are the costs which fluctuate
depending on the scale of the activity (eg, wages of care
attendants, NI, travel costs, training for care attendants)
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