In budget formulation, what is step two?

• A. Identify operational requirements
• B. Determine the cost involved
• C. Prioritize and justify requirements
• D. Identify and prioritize unfunded deficiencies

Answer: (B)

Budget formulation moves from defining what is needed to estimating what it will cost. After identifying the operational requirements, the next essential action is to determine the cost involved for those needs. This cost data gives each requirement a price tag, which is crucial for judging affordability, comparing alternatives, and laying the groundwork for later decisions. Once you have cost estimates, you can prioritize and justify which requirements to fund, and afterward identify any unfunded deficiencies that may require adjustments or additional resources. The other options fit different moments in the process: identifying operational requirements happens earlier, prioritizing and justification follow cost estimation, and identifying unfunded deficiencies comes after prioritization to reveal funding gaps.