Defining your resources
Separate out capital and labour costs
Delivering any service or activity requires the expenditure of resources - either in terms of capital or labour. Capital expenses relate to the purchase of goods. Typical examples are physical assets such as equipment and buildings. Keep in mind, however, that capital costs may also relate to intangible assets such as trademarks and patents. Labour refers to the cost of wages paid to employees who are involved in the production of goods or the rendering of services within the organisation.
Separate out direct and indirect costs
Expenditure may also be classified as either direct or indirect. Directly incurred costs are those associated with specific activities where the amount of resource spent can be directly measured. Indirect costs generally cover shared resources and support services that can be difficult to break down at a more granular level. Indirectly incurred costs may refer to general management and administration, or the use of common facilities and systems. These are also frequently referred to as overhead costs.
Bear in mind that direct labour costs should include the employees' salaries plus any benefits and/or taxes to be paid by the employer. In the UK for example, a requirement for full economic costing (FeC) has become a main driver for including labour in curation cost modelling.
Take account of adjustments
To be effective, analysis of your curation-related expenditure should also reflect any accounting principles and financial adjustments that form part of the working practices applied within your organisation. Accounting principles regulate how to perform calculations of the resources required to complete activities. These principles tend to be based on national and/or international standards. Most accounting principles allow for adjustments to be made to recognise factors such as inflation, depreciation and accrual of interest.
Next steps
Now you know about resource cost concepts, continue with our description of how the core cost concepts fit together.
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