W.T.’s parents have agreed to provide him with additional support during the fall semester (up to $400 per month), but have asked that he compute the amount of additional cash he’ll need each month so that they can properly budget. At the end of each month, they’ll provide the additional estimated cash he believes he’ll need for the following month. Help W.T. provide these projections by completing the following schedule for August and September. Assume he will be able to use profits from the business as needed to pay expenses. Payments to the newspaper and social media manager are not due until the end of each month. To provide some extra security, he’d like to maintain a cash balance of at least $500. Currently, he has $100 in his account. How much should he ask his parents for in order to support himself in August? August September Beginning cash balance $ $ + Estimated sales $ $ Less: Estimated payments: Variable costs $ $ Fixed costs $ $ = Estimated ending cash balance before additional funds $ $ + Amount needed from parents $ $ = Ending cash balance $ $
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Part 1 is complete. I have copied it before Part 2, so it will help complete Part 2.
Part 1
After discussing his growth plans with several people, including his social media manager, W.T. believes he should be able to add 2 jobs in September, 10 jobs per month during October, November, and December. He will be operating his business for all of August and December, even though school won’t be in session throughout those months.
Assume that W.T. generates 40 jobs in the first month and charges $15 per job.
Based on these assumptions, complete the sales budget below by filling in the missing amounts:
|
Month |
Jobs |
Sales |
Growth rate |
|
August |
40 |
$600 |
N/A |
|
September |
42 |
$630 |
5.00% |
|
October |
52 |
$780 |
23.81% |
|
November |
62 |
$930 |
19.23% |
|
December |
72 |
$1,080 |
16.13% |
Based on the above, and on analysis completed in previous classes, complete the following:
|
|
August |
September |
October |
November |
December |
|
Total sales |
$600 |
$630 |
$780 |
$930 |
$1,080 |
|
Less: Total variable costs |
$230 |
$241.50 |
$299 |
$356.50 |
$414 |
|
= Total contribution margin |
$370 |
$388.50 |
$481 |
$573.50 |
$666 |
|
Less: Total fixed costs |
$220 |
$220 |
$220 |
$220 |
$220 |
|
= Total profit |
$150 |
$168.50 |
$261 |
$353.50 |
$446 |
Part 2
W.T.’s parents have agreed to provide him with additional support during the fall semester (up to $400 per month), but have asked that he compute the amount of additional cash he’ll need each month so that they can properly budget. At the end of each month, they’ll provide the additional estimated cash he believes he’ll need for the following month.
Help W.T. provide these projections by completing the following schedule for August and September. Assume he will be able to use profits from the business as needed to pay expenses. Payments to the newspaper and social media manager are not due until the end of each month. To provide some extra security, he’d like to maintain a cash balance of at least $500. Currently, he has $100 in his account. How much should he ask his parents for in order to support himself in August?
|
|
August |
September |
|
Beginning cash balance |
$ |
$ |
|
+ Estimated sales |
$ |
$ |
|
Less: Estimated payments: |
||
|
Variable costs |
$ |
$ |
|
Fixed costs |
$ |
$ |
|
= Estimated ending cash balance before additional funds |
$ |
$ |
|
+ Amount needed from parents |
$ |
$ |
|
= Ending cash balance |
$ |
$ |
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