Question

Babycakes, a specialty bakery, is the company that will be considered for all parts of your budget planning and control report. For this assignment, you will develop a three to four (3 – 4) page paper in which you address the following.

1. Briefly discuss the ways a realistic budget will benefit the owner of Babycakes versus having no budget at all. Be sure to use Babycakes as the company and any specific product details in your explanation.
2. Prepare a sales budget for the LA Babycakes store for the 4th quarter of 2016. Present the number of units, sales price, and total sales for each month; include October, November, and December, and a total for the quarter. Use one-half of the Valentine’s Day sales as the basis for a usual day in the new quarter. Use 30 days for each month. Calculate the total sales for each month for October, November, and December.
3. Create three (3) new products, one (1) for each of the three (3) holiday seasons in the 4th quarter. Estimate the sales units, sales price, and total sales for each month. Describe the assumptions used to make these estimates. Include an overview of the budget in the report, presenting the actual budget as an appendix with all data and calculations. Add these amounts to your sales budget.
4. The owner of Babycakes is interested in preparing a flexible budget rather than the static budget she currently uses. She does not understand why, when sales increase, her static budget often shows an unfavorable variance. Explain how a flexible budget will overcome this problem. Use the details of your newly prepared budget for the 4th quarter of 2016 to address her concern.
5. Imagine that Babycakes is facing a financial challenge that is causing the actual amount of money that it spends to become significantly more than its budgeted amount. Include a discussion of your own unique cause of the overspending. Explain the corrective actions needed to address these challenges.
6. Integrate relevant information from at least three (3) quality academic resources in this assignment.

Answer 1

Answer:

Answers:-

Prepare a sales budget for the LA Babycakes store for the 4th quarter of 2016. Present the number of units, sales price, and total sales for each month; include October, November, and December, and a total for the quarter. Use one-half of the Valentine’s Day sales as the basis for a usual day in the new quarter. Use 30 days for each month. Calculate the total sales for each month for October, November, and December.

A sales budget contains information concerning expected sales for a business. It is a component of a master budget that details the financial plan, marketing and sales expectation of the business. In the Babycakes bakery, the sales budget incorporates expectations of what the business intends to sell in terms of units and prices. This will be done in a sales forecast form. The company engages in the manufacture and sale of special cakes. These are cakes for birthday occasions, weddings, valentine, Christmas and other occasions. The cases are made and sold on demand. The bakery does not sell other products besides cakes. The following table offers a forecast of the sales expectation for the 4th Quarter 2016. Appendix I offer the sales budget and forecast for the bakery during this quarter.

The sales forecast for each month have been broken down in the following table

Total sales in all Categories $20,510 $34,100 $68,200

The figures for special orders may vary from client to client depending on their needs and requirements. The cakes will be baked in three categories; small, medium and large. Each category has a basic price. The price increases with each special order by the client.

Create three (3) new products, one (1) for each of the three (3) holiday seasons in the 4th quarter. Estimate the sales units, sales price, and total sales for each month. Describe the assumptions used to make these estimates. Include an overview of the budget in the report, presenting the actual budget as an appendix with all data and calculations. Add these amounts to your sales budget.

To take advantage of the holiday seasons in this quarter, the bakery will introduce three new products. The products are Babycakes Cream Xmas, a cake designed for the Christmas occasion, Thanksgiving muffins for the thanksgiving and happy year cakes for the New Year occasion. Appendix II offers a breakdown of the product and their prices during this occasion.

The owner of Babycakes is interested in preparing a flexible budget rather than the static budget she currently uses. She does not understand why, when sales increase, her static budget often shows an unfavorable variance. Explain how a flexible budget will overcome this problem. Use the details of your newly prepared budget for the 4th quarter of 2016 to address her concern.

To arrive at the above estimates, a number of assumptions were taken. Firstly, during this season, people like to spend time with their friends and family. There is a lot of good will going on. People will be more willing to spend more on cakes during this period than in any other. Another assumption is that people have saved some money to spend during this occasion. There is a lot of money in circulation.

A flexible budget is one that changes in respect to changes in the variables included in the budget. A fixed budget does not change. In a flexible budget, when the variable changes, for instance, the price of a commodity increases or decreases, the total amount changes accordingly. A flexible budget is important because it allows a business to keep a realistic over view of what is going on in the business. When the budget shows an unfavorable variance, the implication is that the price of the cakes declined as opposed to the original forecast or the volume of units sold declined. This led to a decline in the revenue gained from sales. It could also imply that the cost of raw materials increased making the margin of profit decline considerably. In the new budget, if an item say Wedding cakes declined in sales volume of small cakes from estimated 430 to 300, the total for that category declines by $1,040. This will be reflected in the final figure of the flexible sales budget. A fixed sales budget might not reflect this variance.

Imagine that Babycakes is facing a financial challenge that is causing the actual amount of money that it spends to become significantly more than its budgeted amount. Include a discussion of your own unique cause of the overspending. Explain the corrective actions needed to address these challenges.

Since Babycakes has moved to a second location, there is opportunity for higher profit, but overspending falls into place due to the significant difference in pallets between the New York clients and LA clients. Due to trying to overcompensate to appease their new clients, Babycakes has hit a bump in the road by producing products that sold well in New York but does not have the same results in LA. In order to avoid overspending, Babycakes would need to analyze which products are not being moved off the shelves as quickly as others. The products that aren't making as much profit because of the new location should be made in smaller quantities as to not make more than the average selling rate.