In a business, there are several different types of budgets that has different department/area the business has to make. For example, in a business, you can find the sales and revenue budget (a financial document that set out the business expected sales and revenue from selling its products or services), the expenditure budget (financial document that sets out the expected expenditures of a monthly basis on those items) and the profit budget (financial documents that sets out the predicted profit that a business could make).
The A and the F at the side, determine if the business has had good expectation or not, for example, A stands for Adverse which means that the expectation of the business were not right.
In the table above you will find a blue line which represent the break-even point, this point will show you when the business will stop losing money and then start making profit from the next sales.
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Shabbier’s restaurant will lose money until achieve the breakeven point which will be achieved when his business reach 1400 meals sold. Before that, the business will have to deal with loss of money, for example, there are the variable and the fixed costs to be paid in order to deliver a good meal to customers, when adding both you will get the total cost.
To find out how much the business is making or losing you have to subtract the total revenue with the total cost, it will give you a figure number that you will be able to identify whether the business is making profit or not. By monitoring the business, shabbier will be able to have a long term view of his loss and profit made during the year or some months, this is important because he will be able to control costs and find out when the business will start making profit.
Without producing a budget, shabbier could be working towards nowhere, he would not know whether his business would make profit or go into debt. If the business do not get enough money in order to pay its expenses, shabbier’s business could close down. However, Shabbier’s prepared a budget with all his expenses and income, it will be easier to help the owner of the business. This chart above is related to the budget, it is possible to find the information of the budget on it, for example, the blue line represents the total revenue, the grey fixed cost and the yellow total cost.
The grey line (fixed cost) doesn’t change direction, it Is one line straight, it is because those figures numbers do not change, the blue line is the total revenue, it represent the profit the business is making, and the total cost represent the variable and the fixed cost together, when the blue line meets the yellow line it will be the breakeven point. At the break even the business won’t be making loss either profit. Since then, after those lines meet, it will the business’ margin of safety. Individual Task Essay
In a business, the owners/departments should create and manage their own budgets, for example, in Tesco, there are several departments, and every one of them has their costs, when creating a budget for every single department the business will be able to find out the total outcome of the each department. At the end of the budget, when adding all costs from all the department, the company can manage to work out how much profit or loss they will be making during a certain amount of time.
This type of budget is called the expenditure budget, business can use it to have a general idea of how much the business will spend at the end of each month or even a year. If the company do not produce this kind of budget, the business will not know how much the outcome of the company is. The profit budget is there to set out the predicted profit the business will make during a period of time, for example with this budget, Tesco will be able to predict the business’s income of the year or months. The business will also be able to understand what and how much the business could make as soon as they sell their services or products.
The revenue budget will help the business understand how many sales and revenue they will need to make in order to start making profit. A revenue budget is essential to Tesco be able to understand and manage their sales revenue, expenses and capital expenditures. If the business do not create the company’s budget, the business will not be able to understand and manage their own expenses and income, if for example Tesco do not manage their balance they could lead to failure of the company by not paying the right expenses that are in need.