This article discusses the importance of budgeting for businesses, with a focus on Babycakes Bakery. It covers the benefits of a realistic budget, sales budget for the bakery, introduction of three new products, benefits of flexible budget, and overspending issue in budgeting.
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Running head: BUDGETARY PLANNING FEATURING BABYCAKES-ACCOUNTING Budgetary Planning Featuring Babycakes-Accounting Name of the Student: Name of the University: Name of the Professor Course Title: Date: Author’s Note:
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1 BUDGETARY PLANNING FEATURING BABYCAKES-ACCOUNTING Table of Contents Benefit of Budgets...........................................................................................................................2 Sales Budget for Los Angeles Babycakes Bakery...........................................................................2 Introduction of three New Products.................................................................................................3 Benefits of Flexible Budget.............................................................................................................3 Overspending Issue in Budgeting....................................................................................................4 Conclusion.......................................................................................................................................4 Reference.........................................................................................................................................5 Appendix..........................................................................................................................................6
2 BUDGETARY PLANNING FEATURING BABYCAKES-ACCOUNTING Benefit of Budgets In a business, the role of budgeting is very important as the same allows the management to plan ahead for all activities of the business and at the same measure and supervise the performance of the business. The business of Babycakes is a bakery shop which is engaged in supplying baking products, needs to have an appropriate budget for the purpose of planning for financing requirements of the business (Wiley., 2011). The benefit of a realistic budget is that the owner of the business would be able to identify any development in business and also know regarding the costs and revenue which is generated by the business in actual terms (Bigelow, 2009). The budget would not only allow the business to effectively forecast the revenue and costs of the business for the purpose of setting targets and but also effectively monitor the performance of the business om the basis of the target which is set by the business. In the business of Babycales Los Angeles Branch, the business would be needing a realistic budget for setting sales target and then for making comparisons with the target set by the business. Sales Budget for Los Angeles Babycakes Bakery The sales budget for Los Angeles Babycakes Bakery is prepared for the fourth quarter. The budget which is prepared is a static budget and the management of the business anticipates that overall sales of the business would be remain fixed on a month by month basis and the same is shown to be 1000 units which has a sales price of $ 2 per unit as shown in the sales budget which is shown in the appendix section. The management has assumed that the shop would be able to generate $ 2000 on a daily basis for the three-month period (Caldwell, 2017). The total sales which can be achieved by the business as per the assumption is shown to be $ 60,000. The budget is prepared considering the
3 BUDGETARY PLANNING FEATURING BABYCAKES-ACCOUNTING festive season and the budget is also prepared considering the sales which is achievable during the quarter. Introduction of three New Products The management of the Bakery shop is considering introduction of three new products which will be introduced in the last quarter. The products are introduced considering the festive season in the last quarter. The business would be introducing Brownie in October in order to support the festival of Halloween. The business expects to sell 200 units per day for $ 5 per unit. On the basis of the month the business would be able to generate $ 30,000. The business plans to introduce black forest cake in November and the same is expected to be generate significant amount of revenue as the product is quite popular among the consumers (Conner, 2013). The total monthly sales which the business would be able to generate is shown to be $ 120,000. During the month of December, the business would introduce fruit cakes which are popular in the month of Christmas and the same is shown in the budget to generate a total sale of $ 180,000. The products are estimated to generated significant amount of revenue considering the market conditions in the business remains favorable. Benefits of Flexible Budget The management of Babycakes Bakery follow Static Budget as per the policies and for the same purpose the management is considering changing the budgeting style and change into a flexible budget (Info Entrepreneurs, 2009). The basic advantage of a flexible budget is that the any changes in cost, volume or price structure of the product offered by the business can be appropriately measured with the help of flexible budget(Coveney & Cokins, 2014). Static Budget are prepared before the financial year commences and the actual data which is required
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4 BUDGETARY PLANNING FEATURING BABYCAKES-ACCOUNTING to prepare a budget is not available in case of static budget. Another disadvantage of static budget is that as the sales of the business increases, the costs of the business also rises which might not be the scenario in most of the cases. Therefore, the management of Babycare Bakery Store should follow flexible budget. Overspending Issue in Budgeting In a budget, a problem of overspending is common where in the actual expenses of the business exceeds the budgeted expenses and this results in variances in the budget(Nelson, 2005). The costs of a new Bakery shop would naturally be high in the initial months of opening the business as the store is new and a lot of start up expenses need to be incurred by the business. The business needs to recruit and train new employees as well as procure raw materials and also set up the business appropriately which would be requiring funds (Davoren, 2017). The business would also need to appropriately advertise and promote the products of the business in such a way that the business is able to attract new customers. Conclusion The above discussion shows that the practice of Budgeting is an important tool which can help the business to maintain the finances and also control the performance of the business. In addition to this, flexible budgets also help the business to predict the future earnings and revenue ofthebusinessconsideringdifferentlevelofproduction.Therefore,themanagementof Babycake Bakery needs to introduce a flexible budget for predicting the performance and also supervise the performance of the business.
5 BUDGETARY PLANNING FEATURING BABYCAKES-ACCOUNTING Reference Bigelow,L.(2009).Staticvs.FlexibleBudgetsforNewBusinesses.Retrievedfrom http://smallbusiness.chron.com/static-vs-flexible-budgets-new-businesses-20879.html Caldwell,M.(July21st,2017).HowToBudgetSuccessfully.Retrievedfrom https://www.thebalance.com/how-to-budget-successfully-2385709 Conner, C. (March 4th, 2013).The ‘8’ Great Challenges Every Business Faces (And How To MasterThemAll).Retrievedfrom https://www.forbes.com/sites/unicefusa/2018/01/19/demanding-an-end-to-child- trafficking-and-forced-labor/#230af6dc4e19 Coveney, M., & Cokins, G. (2014).Budgeting, planning, and forecasting in uncertain times. Davoren, J. (2017).The Advantages of a Flexible Budget. Smallbusiness.chron.com. Retrieved from http://smallbusiness.chron.com/advantages-flexible-budget-57105.html InfoEntrepreneurs,(2009).BudgetingandBusinessPlanning.Retrievefrom http://www.infoentrepreneurs.org/en/guides/budgeting-and-business-planning/ Nelson, R. (2005).Windy. Minneapolis: Lerner Publications Co. Wiley. (2011).Budgetary Planning featuring Babycakes[Video].
6 BUDGETARY PLANNING FEATURING BABYCAKES-ACCOUNTING Appendix Sales Budget for the Quarter MonthUnit (qty)Price per UnitNet Daily SalesNet Monthly Sales October1000$2.00$2,000.00$60,000.00 November1000$2.00$2,000.00$60,000.00 December1000$2.00$2,000.00$60,000.00 Total$6,000.00$180,000.00 Sales Budget for three Products OctoberNovemberDecemberNet DailyNet Monthly Brownies (units)200$30,000.00 Selling Price5$1,000.00 Black Forest Cake (units)400$ 120,000.00 Selling Price10$4,000.00 Fruit Cake (units)500$ 180,000.00 Selling Price12$6,000.00 Net Daily Sales$11,000.00 Net Monthly$330,000.00