Los Angeles and Budget

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 its financial year, making it possible to undertake required cut back expenses or augment spending to make the most of growth prospects. 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 pointed out. Babycakes Los Angeles Sales Budget For the Financial Quarter Ending December 31, 2016 Month October November December Total Sales Units 22500 22500 22500 67500 Price per Unit $3.50 $3.50 $3.50 Total Sales $78,750.00 $78,750.00 $78,750.00 $236,250.00 The total sales for October, November and December total $78,750 for each month. Therefore, the total sales for the financial quarter is $236,250. New Products Created There are three new products created for the holiday seasons in the 4th quarter.

The three products include Thanksgiving cupcakes, Christmas pudding and Babka for Thanksgiving, Christmas and Hanukkah holidays respectively. The following are the assumptions made for the various estimates in the budget. The thanksgiving holiday will take place between November 22 and 28. The Christmas holiday in this case will take place between 23 and 26 December and Hanukkah will take place between 24 and 31 December. It is expected that the daily sales for thanksgiving will shoot up to 1,250. For Christmas and Hannukah, it is expected that the sales will rise up to 1,750 everyday.

Sales Price per unit Total Thanksgiving November 22-28 $3.50 $12,250.00 Christmas and Hannukah December 23-31 $3.50 $31,500.00 Babycakes Los Angeles Sales Budget For the Financial Quarter Ending December 31, 2016 Month October November December Total Sales Units 22500 22500 22500 67500 Price per Unit $3.50 $3.50 $3.50 Total Sales $78,750.00 $78,750.00 $78,750.00 $236,250.00 Additional Sales (New Products) 0 $12,250.00 $31,500.00 $43,750.00 Total Sales $91,000.00 $110,250.00 $280,000.00 Flexible Budget The key advantage that the flexible budget has over the static budget takes into account its adaptability. Realistically, a business will face constant changes. Having a flexible budget makes it possible to deal with such changes.

In a static budget, the business does not have the capacity to alter the budget to manage the changes, if for instance, sales increase faster than expected. Such changes are what lead to budget variances. The flexible.