 Assignment: Budget Planning and Control

Due Week 9 and worth 200 points

Before approaching this assignment, be sure that you have watched the following video.

 Budgetary Planning featuring Babycakes *FULL VIDEO*.

(2016). YouTube. 

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.

 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.

When discussing ways a realistic budget benefits a company versus having no budget at all, one
must understand what a budget is and all that it entails. Wagoner (2012) states that for
businesses, control and planning are the two main reason of budgeting. Budgeting allows us to
keep record of every financial encounter and transaction in a fashion that it helps to grow a
business. With control and planning, a business can confide in a budget to organize every
financial decision for the present or future endeavors. A realistic budget will benefit the owner
of Babycakes versus having no budget at all due to the previous statement for the ability to
control and plan. Should Babycakes choose not to have a budget, extreme overspending could
take place, lack of financial accountability could arise, and strategy for further growth and
development could be hindered. Gronhaug and Ims (1988) explains budgets to be reflections of
predicted plans, as well as, aspiring the future behaviors and outcomes of those plans. So with a
realistic budget, Babycakes has a better handle on the control and planning of the business which
will aid in achieving expansion and prosperity.

 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.
 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.
 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.
 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. If there is a product that sells more quickly, then
Babycakes should make more of that product to even out the profit and not necessarily lose
anything. For example, if Babycakes chocolate cupcakes is the number one seller, and their
cornbread which may not be so popular is losing profit, then more cupcakes should be sold
and/or less cornbread should be made or discontinued as to not lose a profit. By increasing the
quantity of higher selling products and decreasing the quantity of lower selling products,
Babycakes can narrow down, or even deplete the possibility of overspending. This will help to
increase profitability and keep the budget at a positive constant.

 Integrate relevant information from at least three (3) quality academic resources
in this assignment.  Note: Please do not use your textbook as an academic
resource. Also, Wikipedia and other Websites that are unreliable do not qualify
as academic resources.

Your assignment must follow these formatting requirements.

 Be typed, double spaced, using Times New Roman font (size

12), with one-inch margins on all sides; references must
follow APA or school-specific format. Check with your
professor for any additional instructions.
 Include a cover page containing the title of the assignment, the
student’s name, the professor’s name, the course title, and the
date. The cover page and the reference page are not included
in the required page length.
 An abstract is not required.

The specific course learning outcomes associated with this assignment are:

 Evaluate management control systems and examine their

relationship with accounting and planning, including feedback
and non-financial performance measurements.
  Evaluate decision-making tools for capital investments,
budgeting, and budgeting controls.
 Analyze financial accounting tools and techniques that
convert financial accounting data into information for decision
making.
 Use technology and information resources to research issues
in financial accounting for managers.
 Write clearly and concisely about financial accounting using
proper writing mechanics.

Appendix

LA Babycakes
Sales Budget
For the Year Ending December 31, 2017
Quarter
OCTOBER NOVEMBER DECEMBE YEAR
R
Expected Unit Sales 22,500 (a) 22,500 22,500 67,500
Unit Selling Price X $3.50 X $3.50 X $3.50 X $3.50
Total Sales $78,750 $78,750 $78,750 $236,250
Add: Holiday Unit Sales 4,500 (b) 4,500 4,500 13,500
Unit Selling Price X $4.00 X $4.00 X $4.00 X $4.00
Holiday Total Sales $18,000 $18,000 $18,000 $54,000
Total Combined Sales $96,750 (c) $96,750 $96,750 $290,250
(a) 750 units x 30 days = 22,500
(b) 20% of original units x 30 days = 4,500
(c) Total Sales + Holiday Total Sales = $96,750

20% increase in sales for holiday treats= 150 more units sold per day
Holiday price $4.00
Holiday Specialty Cupcakes
OCTOBER NOVEMBER DECEMBER
Halloween- Pumpkin Thanksgiving- Sweet Christmas- Egg Nog
Spice Jack-o-lantern Potato Pie Pound Cake Cupcake
Cupcake Cheesecake Cupcake

Estimated Unit 4,500 (a) 4,500 4,500

 Sales
Estimated Unit X $4.00 X $4.00 X $4.00
Selling Price
Estimated $18,000 $18,000 $18,000
Total Sales
(a) 20% of original units x 30 days = 4,500

References

Wagoner, J. (jan2012). Personal Budgeting: What Are We Trying to Do? . Journal of Financial
Service Professionals, 66(1), 10-12. Retrieved February 22, 2017, from
http://eds.a.ebscohost.com/eds/detail/detail?vid=34&sid=16e9c407-1c1b-451f-957d-
9446e3b77513%40sessionmgr4006&hid=4108&bdata=JnNpdGU9ZWRzLWxpdmUmc2NvcGU9
c2l0ZQ%3d%3d#db=bth&AN=70045035

Gronhaug, K., & Ims, K. O. (jul-sep1988). Setting the Sales Budget: An Exploratory Study.
Journal of Behavioral Decision Making, 1(3), 177-186. Retrieved February 22, 2017, from
http://eds.a.ebscohost.com/eds/detail/detail?sid=16e9c407-1c1b-451f-957d-
9446e3b77513%40sessionmgr4006&vid=44&hid=4108&bdata=JnNpdGU9ZWRzLWxpdmUmc2
NvcGU9c2l0ZQ%3d%3d#AN=16566696&db=bth

Rachita, U., DIACONESCU, T., & Mazga, A. (2016). FLEXIBLE BUDGET MANAGEMENT AND
"CASH-FLOW" PLAN IN NATIONAL AND INTERNATIONAL HOTEL UNITS. Hyperion
International Journal of Econophysics & New Economy, 9(1), 199-2017. Retrieved February
22, 2017, from http://eds.a.ebscohost.com/eds/detail/detail?sid=16e9c407-1c1b-451f-957d-
9446e3b77513%40sessionmgr4006&vid=53&hid=4108&bdata=JnNpdGU9ZWRzLWxpdmUmc2
NvcGU9c2l0ZQ%3d%3d#AN=117888962&db=a9h

Magloff, L. (2017). Key Advantages & Disadvantages of Using a Static Budget. Retrieved
February 22, 2017, from http://thefinancebase.com/key-advantages-disadvantages-using-
static-budget-2391.html