Btec business level 3 Unit 2 P6 M4 D3

Jaydip Pravinkumar Unit 2 Costs, budgeting and break-even.Task 5 - P6, M4, D3

Example of a Budget

SUMMARY ACTUAL BUDGETED OVER BUDGET UNDER BUDGET

Total income 1,432,500.00 1,318,080.00 114,420.00
Total expenses 339,760.00 314,910.00 24,850.00
Income less expenses: 1,092,740.00 1,003,170.00 89,570.00
INCOME DETAILS ACTUAL BUDGETED OVER BUDGET UNDER BUDGET

Sales 1,400,000.00 1,200,000.00 200,000.00
Interest earned 5,000.00 4,500.00 500.00
Fees 1,000.00 980.00 20.00
Commissions 10,000.00 98,000.00 -88,000.00
Rent 9,000.00 8,000.00 1,000.00
Royalties 2,500.00 2,600.00 -100.00
Other 5,000.00 4,000.00 1,000.00
Total income: 1,432,500.00 1,318,080.00 114,420.00
EXPENSE DETAILS ACTUAL BUDGETED OVER BUDGET UNDER BUDGET
Salaries and wages 246,000.00 248,000.00 -2,000.00
Commissions 10,000.00 12,000.00 -2,000.00
Advertising 6,000.00 8,000.00 -2,000.00
Delivery 0.00 0.00
Shipping 0.00 0.00
Travel 4,600.00 5,600.00 -1,000.00
Other 1,000.00 1,200.00 -200.00
Total sales expenses: 267,600.00 274,800.00 -7,200.00
Percent of total: 78.76% 87.26%

ADMINISTRATIVE
Salaries and wages 12,000.00 10,000.00 2,000.00
Employee benefits 5,000.00 6,000.00 -1,000.00
Payroll taxes 500.00 500.00
Insurance 14,000.00 14,000.00
Loans 6,000.00 5,000.00 1,000.00
Office supplies 4,000.00 4,100.00 -100.00
Travel & entertainment 200.00 190.00 10.00
Postage 300.00 320.00 -20.00
Furnishings 0.00 0.00
Contributions 0.00 0.00
Dues 0.00 0.00
Other 0.00 0.00
Total admin. expenses: 42,000.00 40,110.00 1,890.00
Percent of total: 12.36% 12.74%

SERVICE & EQUIPMENT
Accounting 1,200.00 1,500.00 -300.00
Legal 5,000.00 6,000.00 -1,000.00
Utilities 15,000.00 15,789.00 -789.00
Telephone 5,000.00 4,800.00 200.00
Equipment purchases 3,400.00 3,000.00 400.00
Rent & maintenance 560.00 600.00 -40.00
Other 0.00 0.00
Total S&E expenses: 30,160.00 31,689.00 -1,529.00
Percent of total: 0.09 0.10

, Jaydip Pravinkumar Unit 2 Costs, budgeting and break-even.Task 5 - P6, M4, D3

To achieve P6 answer the following questions:

 What is a budget?
Budget is an estimated of costs, revenues and resources over a specific periods, this
is how much amount of money should be going out of the business and also coming
into the business in a set period of time.

 What is the purpose of a budget?
The purpose of budget is a forecast of income and expenditures this is also a tool for
decision making for the business so it helps business to make important decision.
The purpose of budgeting is to enable the actual business performance to be
measured against the forecast business performance i.e. is the business living up to
our expectations.

 What problems could your company have if its budget were not properly
maintained?
If a business was unable to maintain their budget there are lots of problem that they
might have to face and the major problem that the business might have been face is
that there will be a bad cash flows and also the profit level will drop which no
business want so this is the problem that can be faced if the budget were not
properly maintained.

 How could it correct these problems?
There is a simple solution of the problem and it is that the business or a company
should have their budget properly maintained in order of the solution of the
problem.

 Explain what is meant by zero budgeting.
Zero budgeting is the method for preparing cash flow budgets and operating plans
which every year must start from scratch with no pre-authorized funds.

Fixed and variable costs
Fixed costs Variable costs
Rent Wages
Salaries Electricity
Marketing Stock
Insurance Printing



Break-even

Selling price per unit £12.00
Variable costs per unit £6.70
Fixed costs £2,900