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Budget Planning and Controlling
Benefits of a Realistic Budget
A budget is delineated as a written statement of the plans for management for a particular period of time, conveyed in financial terms. A realistic budget will benefit the owner of Babycakes as compared to having no budget at all. One of the benefits is forecasting. A realistic budget will assist the owner of Babycakes in projecting yearly expenses and also helps in perceiving the costs as they take place. A second benefit is setting the right prices. It is imperative to note that aspects such as the prices of rival products are not the only factors taken into consideration when setting the rates, charges and prices of products. For instance, the price of cupcakes set by Babycakes during Valentines should not be solely determined by what other bakeries set their prices to (Drury, 2013; Weygandt et al., 2009).
A third benefit of Babycakes having an actual budget is that it brings about flexibility. Having a realistic budget will permit the bakery to track the performance of the business all the way through...
For instance, if the sales of the Gluten free cupcakes are slow, the budget will make it possible for Babycakes to ascertain the different areas where expenses can be cut to increase its competitive edge. In addition, having a realistic budget will facilitate Babycakes to obtain capital and credit. Venture capitalists will always be reluctant to provide finances to any business devoid of any financial statements and information proving that it is financially healthy. For instance, if Babycakes opts to expand its stores to various areas in Los Angeles and other states, there will be significant capital required. Therefore, having a realistic budget will enable financial corporations to see their financial position (Weygandt et al., 2009).
Sales Budget for LA Babycakes Store
Sales budget is the initial and fundamental constituent of the master budget. It demonstrates the projected number of sales units of a time period and the anticipated price for every unit. In addition, the sales budget indicates total revenues, which are obtained by multiplying the expected price per unit and expected sales units (Wiley, 2011). The following is a sales budget for the LA Babycakes store for the 4th quarter of 2016 for the months of October, November, and December:
The sales for Valentine's Day was 1,500. Therefore, half the sales is 1,500 / 2 = 750. Everyday sales in each of the months in the financial quarter is 750. The months of October have 30 days, November 30 days and lastly December has 30 days as…
References
Drury, C. M. (2013). Management and cost accounting. New York: Springer.
The Motley Fool. (2017). What Are the Advantages of Using a Flexible Budget vs. a Static Budget?
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2009). Managerial accounting: tools for business decision making. Hoboken: John Wiley & Sons.
Wiley. (2011). Budgetary Planning featuring Babycakes. YouTube. Retrieved from: https://www.youtube.com/watch?v=frh3I2rVDzs
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