Financial Planning and Budgeting Analysis for Babycakes Bakery Report

This report provides a comprehensive analysis of the budgetary planning for Babycakes Bakery, a small business venture. The report begins by emphasizing the importance of budgeting in business management, highlighting its role in planning, performance measurement, and financial control. It then presents a sales budget for the Los Angeles branch of Babycakes, detailing anticipated sales figures and revenue projections for a specific quarter. The report also explores the introduction of new products and their expected impact on sales. Furthermore, it contrasts static and flexible budgets, advocating for the adoption of a flexible budget to better adapt to changing market conditions. The report also addresses the issue of overspending in budgeting, offering insights into potential causes and mitigation strategies. The report concludes by reiterating the significance of budgeting in achieving financial stability and success for Babycakes Bakery, recommending the implementation of flexible budgeting for enhanced financial management and performance monitoring.

Running head: BUDGETARY PLANNING FEATURING BABYCAKES-ACCOUNTING
Budgetary Planning Featuring Babycakes-Accounting
Name of the Student:
Name of the University:
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Author’s Note:

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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

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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

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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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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
of the business considering different level of production. Therefore, the management of
Babycake Bakery needs to introduce a flexible budget for predicting the performance and also
supervise the performance of the business.

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BUDGETARY PLANNING FEATURING BABYCAKES-ACCOUNTING
Reference
Bigelow, L. (2009). Static vs. Flexible Budgets for New Businesses. Retrieved from
http://smallbusiness.chron.com/static-vs-flexible-budgets-new-businesses-20879.html
Caldwell, M. (July 21st, 2017). How To Budget Successfully. Retrieved from
https://www.thebalance.com/how-to-budget-successfully-2385709
Conner, C. (March 4th, 2013). The ‘8’ Great Challenges Every Business Faces (And How To
Master Them All). Retrieved from
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
Info Entrepreneurs, (2009). Budgeting and Business Planning. Retrieve from
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].

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Appendix
Sales Budget for the Quarter
Month Unit (qty) Price per Unit Net Daily Sales Net Monthly Sales
October 1000 $ 2.00 $ 2,000.00 $ 60,000.00
November 1000 $ 2.00 $ 2,000.00 $ 60,000.00
December 1000 $ 2.00 $ 2,000.00 $ 60,000.00
Total $ 6,000.00 $ 180,000.00
Sales Budget for three Products
October November December Net Daily Net Monthly
Brownies (units) 200 $ 30,000.00
Selling Price 5 $ 1,000.00
Black Forest Cake (units) 400 $ 120,000.00
Selling Price 10 $ 4,000.00
Fruit Cake (units) 500 $ 180,000.00
Selling Price 12 $ 6,000.00
Net Daily Sales $ 11,000.00
Net Monthly $ 330,000.00