Committed Costs:


 
A committed cost is the obligation to pay a good or service at any future time. Good practice is to treat all agreements for goods and services (even verbal) as committed costs as the work is performed. Examples of committed costs are:

  • A verbal purchase order to purchase an item
  • A service provider expends time on your project that he intends to invoice for at some future time.
  • A formal purchase order is issued for a piece of equipment for a project.
  • An engineering firm spends hours working on a detailed cost estimate.

 

Accountants expect committed costs to be accrued for either monthly or quarterly and most definitely annually. Committed Costs are to be accrued for in the month that the “work” is performed. Please note Committed Costs are in advance of an invoice being issued or paid.

 

BOSSES HATE SURPRISES!! How do you think your boss would view your performance if you could provide him each day with the information  as shown below:

 

Operating
Company
Type AFE# Location AFE Budget
($)
Current
Estimate($)
Variance C.E. to Orig. Bud. ($) Total
Committed($)
Variance Tot. Comm. to Curr. Est. ($)
Star Oil & Gas Ltd. Drilling 115D12352 101/02-24-025-26W4/02 $820,000 $930,000 -$110,000 $420,000 $510,000
Star Oil & Gas Ltd. Workover 116W21356 121/06-36-052-45W2/01 $25,000 $32,000 -$7,000 $23,000 $9,000
Star Oil & Gas Ltd. Facility 115F21355 100/02-24-062-15W6/04 $250,000 $240,000 $10,000 $200,000 $40,000
Venus Petroleum Corp. Completion 116C32654 131/05-10-020-10W5/01 $1,000,000 $1,200,000 -$200,000 $1,000,000 $200,000
Venus Petroleum Corp. Workover 116W21365 100/02-12-010-10W1/00 $30,000 $25,000 $5,000 $22,000 $3,000
Venus Petroleum Corp. Facility 115F65845 100/06-36-052-24W5/00 $1,500,000 $1,750,000 -$250,000 $300,000 $1,450,000
Saturn Exploration Ltd. Drilling 116D65897 101/05-21-012-14W2/00 $5,500,000 $4,300,000 $1,200,000 $100,000 $4,200,000
Saturn Exploration Ltd. Completion 115C98754 100/01-02-012-30W2/00 $500,090 $400,030 $100,060 $240,000 $160,030


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