Management accounting papers: even holy matrimony isn't sacred when it comes to the application of cost theory. Victor Sheahan explains why a small wedding could prove to be a false economy.
| Author | Sheahan, Victor |
| Position | Management accounting |
The concepts of fixed and variable overheads, overhead absorption and contribution and marginal costing can be found in a number of CIMA papers. They are indispensable tools for any management accountant but, as I recently found, they can also be applied to situations that are far removed from the world of work.
I'm about to marry another cost accountant (no one else understands us). As a traditionalist, I'd assumed that my fiancee's family would be paying for the wedding. When I recovered from the shock of finding that this was no longer so, I asked friends who'd already been through the ordeal what to do. I received advice ranging from "don't do it" and "elope" to "have a quiet ceremony" and "invite everyone--you get married only once".
With no consistent guidance, the safest option seemed to be to choose a modest-sized wedding. To invite lots of people was surely financial folly--who wants to spend years repaying the cost of one day's revelry? One friend joked that, given my job, I could probably calculate to the cent how much it would all cost. What a good idea, I thought. Of course I should tackle it as I would any other budgeting exercise. Suddenly the situation was transformed: far from being a financial nightmare, our wedding was now a relatively basic costing problem. The tricky question of how many people to invite had become a simple equation.
Certain aspects of a wedding involve fixed costs whether there are ten guests or 1,000. Into this category I grouped expenses such as the dress, the cake, the entertainment, the flowers, the priest, the photographer and the rings. In this case, I estimated that 7,500 [euro] would cover all these. The main variable costs--ie, those that will change according to the number of guests--are catering, stationery and postage. I assumed that a figure of E55 per head would cover these.
I understand that the typical wedding present ranges in value from 75 [euro] to 125 [euro] per person. I have assumed that gifts from your closest relatives will be worth more than those from people with whom you have looser ties. In that case, let's say that the value of the gift declines at a constant rate as the connection becomes more distant--ie, as you invite more guests. We could express this as a formula: y = 200-0.75x where y is the value of the gift and x is the number of guests. So the first person invited could be expected to give a gift worth 199.25 [euro] and the 100th person a gift worth 125 [euro]. We...
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