12

[DOCUMENT TITLE]
[Document subtitle]

APPLIED SUBJECT
ENTREPRENEURSHIP

[DATE]
[COMPANY NAME]
[Company address]

Department of Education • Republic of the Philippines

 This module is designed and written with you in mind. It is based on the Most Essential Learning
Competencies (MELCs). It is here to help you master this applied subject on Entrepreneurship.

It contains information about forecasting revenue and cost. It includes activities that will help you
develop start-up costs, different operating costs, and compute for your profits.

This should be accomplished within a week. All activities that require online submission should

be coordinated with your teacher. Save the date for your online class and be updated with teachers’

announcements in the google classroom or FB messenger.

Content Standard: The learner demonstrates understanding of environment and market in one’s
locality/town.

Performance Standard: The learner independently creates a business vicinity map reflective of potential
markets in one’s locality/town.

Objectives

1. Determine start-up costs and operating costs.

2. Prepare a sales forecast; and
3. Compute for profits.

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SHS 12_APPLIED SUBJECT_ENTREPRENEURSHIP
QUARTER 2 – WEEK 3
 I. Identification: Choose the word/s inside the box that will identify the descriptions in each item.
Write the answer on the space provided below.

Profit Cost Working capital operating cost Cashflow Cost of Goods Sold

__________1. It includes the cost of raw materials, packaging, staff training and product promotion.
__________2. These are expenses associated with the maintenance and administration of a business on
a day-to-day basis.
__________3. It is the cost of acquiring or manufacturing the products that a company sells during a
period.
__________4. It is the financial benefit realized when revenue generated from a business activity
exceeds the expenses
__________5. It summarizes the amount of cash and cash equivalents entering and leaving a company.

II. Write FC if the following is a Fixed Cost or VC if it is Variable cost. Use the blanks for the answer.

______6. Raw materials ______8. Delivery/ shipping charges _____10. Loan interest

______7. Sales Commissions ______9. Rent of Warehouse

Ask your parents or observe the monthly expenses at home. List down all the expenses that

your family incur in a month. On the left side, write down the expenses that cost the same (fixed) every

month. On the right side, write down the expenses that change (variable) its cost.

Ex. House Rent - fixed expense Ex. Food expenses - variable expense

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SHS 12_APPLIED SUBJECT_ENTREPRENEURSHIP
QUARTER 2 – WEEK 3
 Forecasting business revenue and expenses during the startup stage is really more art than

science. Many entrepreneurs complain that building forecasts with any degree of accuracy takes a lot of

time-- that could be spent selling rather than planning. But few investors will put money in your business

if you're unable to provide a set of thoughtful forecasts. More important, proper financial forecasts will

help you develop operational and staffing plans that will help make your business a success. (Cerminaro,

Entrpereneur.com)

Lesson Forecasting Revenue and Costs

1 By: Bernadine R. Oray

What is Forecasting?

● It is the process of predicting the future based on the past and present data and analysis of
trends.
● Its purpose is to establish benchmarks and some certainty around financials as a business faces
its future and the decisions it needs to make to survive and prosper.
● Monthly or weekly forecasts may be necessary when starting your business, experiencing rapid
growth, or having financial difficulties. Regular forecasts allow you to closely monitor your
finances and develop strategies to fix problems before they become major issues.

Importance of forecasting revenue

● It establishes goals and sales targets.

● It forces you to know your numbers.
● It focuses the business on the future by learning from its past.
● Accurate forecasts improve future business planning and decision making.

Financial forecasts may include the following:

1. Start-up Costs

The start-up capital is the needed amount of money to buy the facilities and equipment, to
register and license the business and get the necessary certificates.

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SHS 12_APPLIED SUBJECT_ENTREPRENEURSHIP
QUARTER 2 – WEEK 3
 Working capital must be made before the business begins to generate income from the sales of
product. It includes the costs of raw materials, packaging, staff training, product promotion etc.
The start-up capital and initial working capital are calculated to determine whether the
entrepreneur’s savings (known as the owner’s equity) will be sufficient to start the business without a
loan.
The requirement for working capital also continues as the business develops and a ‘Cash flow’
should be prepared. It will differ among types of business. This is because of the seasonal nature of the
raw materials needed and other ingredients.
Below is an example of Start-up Costs forecast for burger production.

Start - up Costs Amount in Pesos

Renovation of space for the store 10,000.00

Equipment 13,500.00

Registration of business 2,500.00

Business License 2,500.00

Hygiene inspection and certificate 2,500.00

Raw materials and ingredients for 4weeks production 9,275.00

Packaging (minimum order) 2,000.00

Staff training (equivalent to income from 2 weeks’ production value) 15,000.00

Initial Production promotion 2,500.00

Staff salaries for 6 weeks 36,000.00

TOTAL 95,775.00
Adapted from Entrepreneurship by Angelo A. De Guzman pp. 54

2. Operating Costs

Operating costs are also known as expenses. Those expenses that must be paid even if no
production takes place are called fixed costs and those that depend on the amount of product that is
produced are the variable costs.
If starting a new business, base the forecast on market research and industry benchmarks. If you
are already operating a business, use records from previous years to assist you. Make sure you allow for
any likely changes, such as an increase in costs or employing additional staff.

3. Sales

A sales forecast is an essential tool for managing a business of any size. It is a month-by-month
forecast of the level of sales you expect to achieve. Most businesses draw up a sales forecast once a year.
It is calculated as Selling price per unit multiplied by the number of units sold.

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SHS 12_APPLIED SUBJECT_ENTREPRENEURSHIP
QUARTER 2 – WEEK 3
 4. Cost of Goods Sold

Selling physical products will need the forecast on how much it costs to produce or stock them.
The COGS forecast relates to your sales forecast. If there are forecast on sales increase, the cost of
producing the goods will also increase (you will need to purchase more components or stock).
To forecast COGS, include all the direct costs associated with production and preparation for
sale. These may include:
a. the wholesale cost of buying completed goods, raw materials, or parts
b. packaging
c. freight and freight insurance
d. commissions paid on sales
e. direct labor costs used to manufacture the product

5. Cash Flow

A cash flow forecast estimates the amount of money you expect to flow in (receipts) and out
(payments) of your business, including projected income and expenses. It is a forecast usually done over
a 12-month period but could also cover a shorter period, such as a month.
Cash flow forecasts determines the extra cash available or experience shortages, so you can make
the right decisions for your business.
It is important to review the cash flow forecast regularly against actual results. A forecast can
provide warning signs that may help in avoiding future financial problems. Watch out if your cash
payments are more than cash receipts – you will run out of money.

Computing for Profits

The formula for solving profit is simple. The formula is profit (p) equals revenue (r) minus total
costs (c). The process of organizing revenue and costs and assessing profit typically falls to accountants in
the preparation of a company's income statement. Revenue is usually the first line on the statement.
Taking out the costs of goods sold, you arrive at gross profit. One step further, subtracting fixed costs,
gets you operating profit. Once irregular revenue and expenses are added, you get bottom-line net profit.

Formula for profit:

Profit = Revenue – Total Costs
If you know the revenue and profit figures you can work out the total costs by doing
Profit – Revenue = Total Costs
If you know the total costs and profit figures you can work out the revenue by doing
Total costs + Profit = Revenue
If you don’t have the total costs
Total costs = Fixed costs + variable costs
Remember, fixed costs stay the same!

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SHS 12_APPLIED SUBJECT_ENTREPRENEURSHIP
QUARTER 2 – WEEK 3
Activity 3.1. List down the start-up costs for the product you want to introduce in your proposed business.
Copy the table below in your notebook to compute for the total start-up cost.

Start - up Costs Amount

Total

Activity 3. 2. From the given table below. Answer the questions that follow. Write your answer in your
notebook.

Rent of Office space 7,000

Packaging Materials 3,500

Electricity and Water bills 6,500

Raw Materials (Ingredients) 10,000

Transportation expense 1,800

Advertising 3,650

Insurance 2,000

Salary of helpers 6,000

a. What are the variable costs? _____________________________________________

b. What are the fixed costs? _______________________________________________
c. How much is the variable cost? __________________________________________
d. How much is the fixed cost? _____________________________________________
e. How much is the total operating cost? ______________________________________

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SHS 12_APPLIED SUBJECT_ENTREPRENEURSHIP
QUARTER 2 – WEEK 3
Activity 1.3. Copy the table below then prepare for the sales forecast of Snacks Company. You may use
your notebook or use a document file to answer this activity. The first one is your example and not
included in answering the question that follows.

MONTH Mini Cupcakes Crinkles TOTAL SALES

P35.00/pack P45.00/pack FORECAST

September 50 P 1750.00 50 P 2250.00 P 4000.00

October 100 P 150 P P

November 150 P 250 P P

December 250 P 350 P P

TOTAL

A. How many packs of cupcakes and crinkles should be produced for the quarter? ___________
B. If each pack of cupcakes has 3 pcs. and each pack of crinkles has 10pcs., how many pieces
cupcakes and crinkles should be produced for the month of December? _____________.
C. How much sales can be generated from selling cupcakes and crinkles from October to
December? _______

Activity 1.4 Complete the table below by forecasting the revenue, identifying fixed cost, computing for
total costs and profits. Afterwards, answer the questions below. Copy and answer in your notebook.

January February March April May June July August

Revenue 4000 6000 9000 11000 15000 20000

Fixed Costs 2000 2000 2000 2000 2000 2000

Variable 4000 5000 6000 6500 6000 5500 5500 6000

Costs

Total Costs

Profit (1000) 1500 5500 7500

1. In which month/S did the business make a loss? __________________________________

2. Which month is the most profitable? ___________________________________________
3. Which month is the least profitable? ___________________________________________
4. Which month(s) had the highest revenue? _______________________________________
5. Which month(s) had the highest operating cost? __________________________________
6. Which month(s) had the highest variable cost? ___________________________________
7. List three ways the business could try to decrease their costs
__________________________________________________________________________

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SHS 12_APPLIED SUBJECT_ENTREPRENEURSHIP
QUARTER 2 – WEEK 3
 ● Forecasting is the prediction of the future based on the past and present data and analysis of
trends. It is observed by starting business weekly, monthly depending on the entrepreneur.
● Forecasting begins with determining the start-up costs and operating costs.
● Forecasting sales is calculated by Selling price per unit multiplied by the number of units sold.
● Profit can be computed by subtracting the total operating costs to the total revenue or sales.

I. Identification: Choose the word/s inside the box that will identify the descriptions in each item.
Write the letter of your answer on the space provided.

Profit Cost Working Capital Operating Cost Cash Flow Cost of Goods Sold

__________1. It includes the cost of raw materials, packaging, staff training and product promotion.
__________2. These are expenses associated with the maintenance and administration of a business on
a day-to-day basis.
__________3. It is the cost of acquiring or manufacturing the products that a company sells during a
period.
__________4. It is the financial benefit realized when revenue generated from a business activity
exceeds the expenses
__________5. It summarizes the amount of cash and cash equivalents entering and leaving a company.

II. Write FC if the following is a Fixed Cost or VC if it is Variable cost.

______6. Raw materials ______8. Delivery/ shipping charges _____10. Loan interest

______7. Sales Commissions ______9. Rent of Warehouse

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SHS 12_APPLIED SUBJECT_ENTREPRENEURSHIP
QUARTER 2 – WEEK 3