Budget Planning And Controlcriteriaexemplary90 Points 200 ✓ Solved

Babycakes is used as the company for all parts of the budget planning and control report. Briefly discuss each of the main reasons the owner of Babycakes needs a budget using the specific company and product details. Include the possible outcomes with a good budget versus having no budget.

Prepare a sales budget for the Babycakes LA store for the 4th quarter of 2016. Present each month; October, November, and December, and a total for the quarter. Use one-half of the Valentine's Day (one day) of sales as the basis for a usual day. Include changes needed due to Halloween, Thanksgiving, and Christmas. Discuss the budget details in the report. Include the actual budget as an appendix with all data and calculations used.

Explain the benefits of using a flexible budget based on the budget you prepared for the 4th quarter of 2016.

Explain the modifications and corrective actions needed to correct challenges and the expected results.

Three (3) relevant and appropriate academic quality references used.

Writing Mechanics, Grammar, and Formatting.

Appropriate use of APA in-text citations and reference section.

Information Literacy and Integration of Sources.

Clarity and Coherence of Writing.

Paper For Above Instructions

Introduction

Budgeting is an essential strategic activity for any business, including Babycakes, a company specializing in unique bakery products. An efficient budget helps in planning and controlling financial operations successfully. This paper will explore the reasons for budgeting, present a sales budget for the fourth quarter of 2016, discuss the benefits of a flexible budget, provide corrective measures for potential challenges, and conclude with a concise discussion on the significance of budgeting.

Reasons for Budgeting

For the owner of Babycakes, several key reasons underscore the necessity of having a budget:

  • Financial Planning: A budget allows the owner to forecast future revenues and expenses accurately. This exercise helps in goal setting and provides a roadmap for operational efficiency.

  • Control Mechanism: Budgets help in monitoring the performance of the business against set benchmarks. They act as control mechanisms, ensuring that expenditures do not exceed income.

  • Informed Decision-Making: With a detailed budget, the owner can make informed decisions regarding resource allocation, promotional strategies, and capital investment.

  • Identifying Variances: A budget promotes comparison between actual and budgeted figures, allowing the owner to identify variances and take corrective actions if necessary.

The potential outcomes of having a good budget versus having no budget can be significant. A well-structured budget can lead to increased profitability, operational efficiency, and a proactive approach to financial risks. Conversely, lacking a budget often results in chaotic finances, missed opportunities, and increased chances of incurring debt.

Sales Budget for Babycakes LA Store (Q4 2016)

In preparing the sales budget for Babycakes in the fourth quarter of 2016, it is essential to consider seasonal influences such as Halloween, Thanksgiving, and Christmas, while also utilizing data from Valentine's Day sales as a reference.

The approach for the sales budget is as follows:

  1. October: Sales are expected to be influenced by Halloween, with themed products increasing demand. Based on current rates, estimated sales are projected at $20,000 for the month.

  2. November: With Thanksgiving's arrival, sales are projected to increase due to orders for holiday desserts, estimated at $25,000.

  3. December: Christmas festivities will push sales further as Babycakes introduces festive product lines. Total estimated sales for December are $40,000.

Summary of Sales Budget:

  • October: $20,000

  • November: $25,000

  • December: $40,000

  • Total for Q4: $85,000

The detailed calculations and budget figures will be presented in an appendix to provide transparent insights into the budgeting process.

Benefits of a Flexible Budget

A flexible budget adjusts to changes in revenue or production levels, making it a more effective tool than a static budget. For Babycakes, this means being able to adapt to fluctuating sales volumes across different holiday periods. Advantages include:

  • Responsive Planning: It accurately reflects changes in business conditions, allowing management to remain agile.

  • Performance Evaluation: A flexible budget facilitates better performance evaluation by comparing actual performance against a budget that adjusts for actual business levels.

Modifications and Corrective Actions

Should Babycakes face challenges during Q4, immediate corrective actions are essential. For instance, if sales figures fall short, the owner may consider:

  • Marketing Efforts: Increasing promotional campaigns and aligning marketing strategies with customer preferences to boost sales.

  • Inventory Management: Adjusting inventory levels based on sales projections to minimize waste and maximize profit.

Expected results from these corrective actions would ideally lead to improved sales performance, customer engagement, and brand loyalty.

Conclusion

The necessity of a budget for Babycakes is evident from the multitude of benefits it brings to financial planning and control. By preparing a sales budget, utilizing flexible budgeting, and having flexible corrective strategies, Babycakes can secure its financial health and optimize its operations, setting a foundation for future growth and sustainability.

References

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  • Drury, C. (2013). Management and Cost Accounting. Cengage Learning.

  • Horngren, C.T., & Foster, G. (1991). Cost Accounting: A Managerial Emphasis. Prentice Hall.

  • Anthony, R.N., & Govindarajan, V. (2014). Management Control Systems. McGraw-Hill.

  • Schmidgall, R.S. (2006). Food and Beverage Cost Control. Cengage Learning.

  • Mintzberg, H. (1994). The Rise and Fall of Strategic Planning. Prentice Hall.

  • Garrison, R.H., Noreen, E.W., & Brewer, P.C. (2017). Managerial Accounting. McGraw-Hill.

  • Kaplan, R.S., & Norton, D.P. (2001). The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment. Harvard Business Review Press.

  • Shillinglaw, G. (2015). Accounting Principles and Practice. Prentice Hall.

  • Weiers, R.M. (2010). Introduction to Business Statistics. Cengage Learning.