## R&D Cost Budget
The R&D cost budget plans expenditure on research (discovering new knowledge) and development (applying research results to create benefits for the firm).
### Methods of Allocating R&D Expenses
| Method | Basis | Best Used When |
|---|---|---|
| 1 | % of total sales value | Sales are stable year-to-year |
| 2 | % of net profit | Profit levels are predictable |
| 3 | Lump-sum based on past experience + future plans | Long-term R&D roadmap exists |
| 4 | Fixed sum based on available cash resources | Cash availability is the binding constraint |
### Key Principle
Research spending must be justified by the benefit it delivers. Once research yields a definite benefit, the development phase begins — meaning the budget must bridge both stages.