CHAPTER 3: THE OPERATING BUDGET AS A CONTROL TOOL

THE OPERATING BUDGET AS A CONTROL TOOL

Assalamualaikum y'all. this entry, we are going to discuss the operating budget as a control tool. first, we need to know what budget is. Budget is A budget is simply a forecast or estimate of projected revenue, expenses and profit. meanwhile, An operating budget is a combination of known expenses, expected future costs, and forecasted income over the course of a year. Together with anticipated changes in sales and costs, provide basic data needed to prepare an operating budget for an upcoming period.

Forecasting sales income

Sales is defined as revenue resulting from the  exchange of products and services for value.

*TOTAL SALES = refers to total volume of sales expressed in dollar (ringgit) terms*

Monetary term:

- Sales price = amount charged each customer purchasing one unit of item

- Average sale = Total sale / Total number of covers (customer)

- Average sale per server = Total sale for Celina / Number of customers for Celina

Non-monetary term:

- Total number sold – total number of steaks , shrimp cocktails or any item sold.

- Cover – to describe one diner (quantity of food he or she consume)

- Total covers – total number of customers served in a given period

- Seat turnover – number of seats occupied during a given period

Treating profit as an expense, estimating expenses, variable and fixed expenses

Relationships between sales, cost of sales, cost of labour, cost of overhead and profit.

*Sales= Cost of sales + Cost of Labour  + Cost of Overhead + Profit

*Sales = Variable cost + Fixed cost + Profit

Allocating costs and profit requirements

- That which must be used to cover variable costs associated with the item sold

- That which remains to cover fixed costs and to provide profit