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Entrep Module 6 Forecasting Costs and Revenue

This document discusses forecasting revenues and costs for a business. It explains that forecasting involves making informed estimates about future sales and expenses based on past data and present factors. The document provides examples of estimating travel time to demonstrate how considering relevant factors leads to better predictions. It emphasizes that entrepreneurs must carefully study various influences to project revenues and costs accurately for business planning purposes.

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elaine tizon
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0% found this document useful (0 votes)
2K views

Entrep Module 6 Forecasting Costs and Revenue

This document discusses forecasting revenues and costs for a business. It explains that forecasting involves making informed estimates about future sales and expenses based on past data and present factors. The document provides examples of estimating travel time to demonstrate how considering relevant factors leads to better predictions. It emphasizes that entrepreneurs must carefully study various influences to project revenues and costs accurately for business planning purposes.

Uploaded by

elaine tizon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 30

21st Century

Literature from the


Philippines and the
11/12
APPLIED World
ENTREPRENEURSHIP
12

Entrepreneurship

Quarter 2 – Module 7

Forecasting
Revenues And Costs

This instructional material was collaboratively developed and


reviewed by educators from public and private schools, colleges, and
universities. We encourage teachers and other education stake holders to
email there feedback, comments, and recommendations to the Department of
Education at action @deped.gov.ph

We value your feedback and recommendations.

Department of Education ● Republic of the Philippine


What I Need to Know

Now that you have identified what business to undertake and are
familiar with the tools and materials needed in the operation of your
business, let us apply what you have learned in the previous module by
forecasting the revenues and costs incurred in your business. You might
probably be wondering how profits are computed. This module will help
guide you realize the revenues and profits of your chosen business.
Revenue is a result when sales exceed the cost to produce goods or
render the services. Cost on the other hand simply refers to the amount of
money used to produce or manufacture goods/merchandise as well as costs
incured in selling the goods/merchandise. How much revenues and costs
incurred in the operation of the business? How are these projected? And
how are these used to compute profit/loss of the business shall be learned
in this module.
This module is divided into two lessons:
Lesson 1 – Forecasting the revenues of the business
Lesson 2 – Forecasting the costs to be incurred
To be able to successfully complete this module, previous knowledge
in multiplying numbers will best help.
Why forecast? We often watch news as Kuya Kim reports the direction
of the typhoon in the next 2 days, what Kuya Kim is doing is giving us
information taken by satellites and gives us the direction of the typhoon. In
weather forecasting, the reporter is giving us advance information that could
help us prepare and be ready for upcoming typhoon. This way, risks such as
accidents, devastation of properties and loss of life may be prevented.

Forecasting is a tool used in planning that aims to support management or


a business owner in its desire to adjust and cope up with uncertainties of
the future. Forecasting depend on data from the past and present and make
meaningful estimates on revenues and costs. Forecasting revenues and
costs is the same as weather forecasting, though forecasting revenues and
costs is in the context of business. Entrepreneurs use forecasting
techniques to determine events that might affect the operation of the
business such as sales expectations, costs incurred in the business as well
as the profit that the business is earning. Making informed estimates
reduces risks that might be experienced by the entrepreneur in the future.
In this module, you will be making informed estimates about revenues
and calculated estimates involving costs incurred by the business. Factors
affecting forecasting will be discussed to better help you in making
projections.
After carefully studying the contents of this module, you should be able to:
• Identify essential factors in forecasting revenues and costs;
• Calculate mark-up and selling price of a product or merchandise;
• Compute projected revenues;
• Compute projected costs.
• Create a table showing projected revenue and costs.
What I Know

Before starting with this module, let us see what you already know about
forecasting revenues and costs. Answer the questions below.
Encircle the letter that bests correspond to your answer.
1. Refers to the amount added to the cost of a product to determine
the selling price –
a. Revenue b. Cost c. Mark Up d. Mark Down
2. Aling Marta sells bibingka in her neighbourhood, every day she can
sell 45 pieces of bibingka at 20 pesos each. How much is her daily
revenue?
a. 900.00 b. 450.00 c. 800.00 d. 1000.00
3. It is a planning tool that helps entrepreneur copes up with
uncertainties in the future operation of the business.
a. Revenue b. Selling c. Benchmarking d. Forecasting
4. The selling price of an item or merchandise is computed by adding
cost per unit and ?
a. Revenue b. Mark Up c. Discount d. Number of Items

5. Mang Berting is a fruit vendor selling at the local public market. He


gets his mangoes from a supplier at 25 pesos per kilo and sells it at
45 per kilo to his customers. How much mark-up was Mang
Berting adding to his selling price?
a. 25.00 b. 30.00 c. 15.00 d. 20.00
6. Aling Elvie sells t-shirt at 175.00 pesos each. If each t-shirt costs
135.00 pesos, How much is the mark-up?
a. 30.00 b. 45.00 c. 40.00 d. 50.00
7. It is the result when sales exceed the cost to produce goods or
render services -
a. Forecasting b. Selling c. Revenue d. Benchmarking
8. It is a tool that allows managers to make educated estimates on
revenue and costs of the business in order to cope up with
uncertainties of the future –
a. Estimating b. Guessing c. Forecasting d. Benchmarking
9. Refers to goods and merchandise at the beginning of operation of
business or accounting period.
a. Merchandise Inventory, end c. Expenses
b. Merchandise Inventory, beginning d. Freight-in
10. Mang Lito sold 5 pairs of slippers. Suppose Mang Lito purchased
the 5 pairs of slippers at P 30.00 each and pays P120.00 freight.
Calculate how much is the cost of goods sold?
a. 220.00 b. 420.00 c. 270.00 d. 200.00
11. Refers to amount paid to transport goods or merchandise
purchased from the supplier to the buyer.
a. Merchandise Inventory, end c. Expenses
b. Merchandise Inventory, beginning d. Freight-in
12. Costs incurred through payment of utilities such as electricity and water
-
a. Revenue c. Mark-up
b. Operating expenses d. Free
13. Merchandise or goods purchased are referred to as –
a. Purchases c. Costs
b. Operating Expenses d. Loss

14. It is the result when cost to produce goods or render services is


greater than the sales –
a. Selling b. Revenue c. Benchmarking d. Loss
15. Jean purchased 5 baskets for P 30.00 each. According to her
calculation, P 10.00 shall be added to the cost as mark-up. How
much is the selling price of each basket?
a. 35.00 b. 40.00 c. 50.00 d. 60.00
Lesso Forecasting the Revenues
n of the
1 Business
What’s In

You have learned in the previous lesson the 4Ms of operations, you
now have the idea on what product/s to manufacture and sell. Now, you
also have a business model. One of the most challenging parts in developing
a business plan is the financial plan. This part allows the entrepreneur to
make decisions based on financial assumptions without even having started
the business. Therefore, these financial projections should be given the most
attention by the entrepreneur.
Let us now examine how the sale of products generates revenues. In
this lesson, we will identify the mark-up and selling price of the product. We
will also project the revenues that the business will make from the sale of
products

What’s New

Have you tried estimating the time that it takes you to travel from
home to school? Try to fill in the necessary information in the table below.
Write your estimate in Estimated Time column, after arriving to school fill in
the Actual Time in the blank provided.
Estimated Time Actual Time
1. _
2. _
3. _
How close were your estimates compared to the actual time? Did
your estimate fell short compared to the actual time? What do you think
were the factors that might have contributed in getting you early to school?
List the reasons in the blank.
_
_

On the other hand, does your actual time exceed your estimates?
What do you think were the factors that might have contributed in arriving
later than your estimated time? List the reasons in the blank.
_
_
__

What is It

Making informed estimates requires careful considerations on


several factors that might affect the outcome of your travel such as, distance
from home to school, the means of transportation you will be taking, the
number of passengers and etc. Traveling from home to school on regular
basis had helped you arrive with an estimate that was very close to the
actual time of arrival.
Considering these factors are essential in making informed
estimates by the entrepreneur. Since the business he/she is venturing
hasn’t started yet, it is important that these factors affecting forecasting will
be determined to better help him/her in making the best decisions for the
business.
The entrepreneur after realizing the potential for profit of his/her
business concept, the next step is to estimate how much the revenue is on
daily, monthly and annual basis. Before going to forecasting and projecting
the revenues of the business, let us determine first what revenue is.
Revenue is a result when sales exceed the cost to produce goods or
render the services. Revenue is recognized when earned, whether paid in
cash or
charged to the account of the customer. Other terms related to revenue
includes Sales and Service Income. Sales is used especially when the nature
of business is merchandising or retail, while Service Income is used to record
revenues earned by rendering services.
You have just learned about what revenue is. This time, let us study
the various factors to consider in forecasting revenues.
The entrepreneur would want his/her forecasting for his/her small
business as credible and as accurate as possible to avoid complications in
the future. In estimating potential revenue for the business, factors such as
external and internal factors that can affect the business must be
considered. These factors should serve as basis in forecasting revenues of
the business. These factors are:
1. The economic condition of the country. When the economy grows, its
growth is experienced by the consumers. Consumers are more
likely to buy products and services. The entrepreneur must be able
to identify the overall health of the economy in order to make
informed estimates. A healthy economy makes good business.
2. The competing businesses or competitors. Observe how your
competitors are doing business. Since you share the same market
with them, information about the number of products sold daily or
the number of items they are carrying will give you idea as to how
much your competitors are selling. This will give you a benchmark
on how much products you need to stock your business in order to
cope up with the customer demand. This will also give you a better
estimate as to how much market share is available for you to
exploit.
3. Changes happening in the community. Changes’ happening in the
environment such as customer demographic, lifestyle and buying
behaviour gives the entrepreneur a better perspective about the
market. The entrepreneur should always be keen in adapting to
these changes in order to sustain the business. For example, teens
usually follow popular celebrities especially in their fashion trend.
Being able to anticipate these changes allows the entrepreneur to
maximize sales potential.
The internal aspect of the business. Another factor that affects forecasting
revenues in the business itself. Plant capacity often plays a very important role in
forecasting. For example, a “Puto” maker can only make 250 pieces of puto every
day; therefore he/she can only sell as much as 250 pieces of puto every day. The
number of products manufactured and made depends on the capacity of the plant,
availability of raw materials and labour and also the number of salespersons
determines the amount of revenues earned by an entrepreneur.
Now that all factors affecting forecasting revenues are identified, you
can now calculate and project potential revenues of your chosen business.
The table below shows an example of revenues forecasted in a Ready to
Wear Online Selling Business.
Example: Ms. Fashion Nista recently opened her dream business
and named Fit Mo’to Ready to Wear Online Selling Business, an online
selling business which specializes in ready to wear clothes for teens and
young adults. Based on her initial interview among several online selling
businesses, the average number of t- shirts sold every day is 10 and the
average pair of fashion jeans sold every day is 6. From the information
gathered, Ms. Nista projected the revenue of her it Fit Mo’to Ready to Wear
Online Selling Business.
She gets her supplies at a local RTW dealer in the city. The cost per
piece of t-shirt is 90 pesos, while a pair of fashion jeans costs 230 pesos per
piece. She then adds a 50 percent mark up to every piece of RTW sold.
Mark up refers to the amount added to the cost to come up with the
selling price. The formula for getting the mark up price is as follows:

Mark Up Price = ( Cost x desired mark up


percentage) Mark Up for T-shirt = ( 90.00 x .50)
Mark Up for T-shirt = 45.00

In calculating for the selling price, the formula is as


follows: Selling Price = Cost + Mark Up
Selling Price = 90.00 + 45.00 Selling Price
for T-shirt = 135.00

Table 1 shows the projected daily revenue of Ms. Nista’s online


selling business. Computations regarding the projected revenue is presented
in letters in upper case A, B, C, D, and E.

Table 1
Projected Daily
Revenue
Fit Mo'to Ready to Wear Online Selling Business
Projected
Projecte
Volume
d
Cost Mark- Sellin (D)
Revenue
Type per up g Average
(E)
of Unit 50% Price No. of
RTW's (A) (B) (C) Items
(Daily)
Sold
(Daily
)
(A) (B)= (A x (C)= (A+B) (D) (E) =(C x D)
.50)
T- 90.00 45.00 135.0 10 1,350.00
Shirts 0
Jeans 230.0 115.00 345.0 6 2,070.00
0 0
Total 320.0 160.00 480.0 16 3,420.0
0 0 0

Table 2 shows the projected monthly and yearly revenue of Ms.


Nista’s online selling business. Computations about the monthly revenue is
calculated by multipying daily revenues by 30 days ( 1 month).
Example, in table 1 the daily revenue is 3,420.00. To get the
monthly projected revenue it is multiplied by 30 days. Therefore,
Projected Monthly Revenue = Projected daily revenue x 30
days Projected Monthly Revenue = 3,420.00 x 30
Projected Monthly Revenue = 102,600.00
On the other hand, the projected yearly revenue is computed by
multiplying the monthly revenue by 12 months. The calculation for
projected yearly revenue is as follows.
Projected Yearly Revenue = Projected daily revenue x 365
days Projected Yearly Revenue = 3,420.00 x 365
Projected Yearly Revenue = 1,248,300.00

Table 2
Projected Monthly and Yearly Revenue
Fit Mo'to Ready to Wear Online Selling Business
Projected Projected
Projected Projected
Volume Volume
Revenue Revenue
Selling Average Average
No.
Type of Price No. of Items of Items
RTW's Sold (Monthly) Sold (Yearly)
(Monthly) (Yearly)
F= (D x H= (D x 365
(C)= (A+B) 30 G= (C x F) I= (C x H)
days)
days)
T- 135.00 300 40,500.00 3,650 492,750.00
Shirts
Jeans 345.00 180 62,100.00 2,190 755,550.00

Total 480.00 480 102,600. 5,840 1,248,300.0


00 0

Table 3 shows the projected monthly revenues covering one year of


operation. The table shows an average increase of revenue every month by 5
percent except June, July to October and December. While the month of
June has twice the increase from previous month, 10 percent. Let us
consider that months covering July to October are considered to be Off-Peak
months, therefore sales from July to October are expected to decrease. It is
assumed that there is no increase in revenue from July to August while from
August to October the decrease in revenues is 5 percent from previous
month. Since revenues from sales of RTW’s are considered to be seasonal, it
assumed that there is 10 percent increase in revenue from November to
December.
Computation for assumed increase of revenue on specific
months is as follows:
Projected Monthly Revenue (Increase) = Revenue (January) x 5 %
increase Projected Monthly Revenue (Increase) = 102,600.00 x .05
Projected Monthly Revenue (Increase) = 5,130.00
Projected Revenue for February = Revenue (January) + Amount of
increase Projected Revenue for February = 102,600.00 + 5,130.00
Projected Revenue for February = 107,730.00

On the other hand, decrease in revenue is computed as


follows: Projected Monthly Revenue (Decrease) = Revenue (August) x
5 % increase Projected Monthly Revenue (Increase) = 144,041.14 x
.05
Projected Monthly Revenue (Increase) = 7,202.06

Projected Revenue for September = Revenue (August) - Amount of


decrease Projected Revenue for September = 144,041.14 – 7,202.06
Projected Revenue for September = 136,839.08

Table 3
Projected Monthly Revenue
Fit Mo'to Ready to Wear Online Selling Business
Month January February March April May June
Revenue 102,600.0 107,730.0 113,116.5 118,772.3 124,710.9 137,182.0
0 0 0 3 4 4

Month July August Septembe October November Decembe


r r
Revenue 144,041.1 144,041.1 136,839.0 129,997.1 136,496.9 150,146.6
4 4 8 3 8 8
Important Assumptions:
February to May Increase of 5% from previous revenue June
Increase of 10% from previous revenue
July to August The same Revenue
September to October Loss 5% from previous revenue November
Increase 5% from previous revenue
December Increase 10% from previous revenue

The numbers in the last table are very attractive, having revenues
that are increasing in numbers is a good sign that a business is growing.
However, an entrepreneur should not be overwhelmed on these revenues as
these are just gross revenue, this is not the final amount of profit or income
an entrepreneur will get at the end of every period. Take note that the
amount of net revenue is still subjected to the expenses incurred in the
operation of business.

What’s More

After learning the calculations presented, you can now compute the
projected revenue by day, month and year based on your business concept.
Aling Minda is operating a buy and sell business, she sells
broomsticks (walis tingting) in her stall at a local market. She gets her
broomsticks from a local supplier for 25 pesos each. She then adds 50
percent mark-up on each broomstick. Every day, aling Minda can sell 30
broomsticks a day.
Use the template below and fill in the necessary figures based on
the scenario. Remember to use the factors to consider in projecting revenues
and refer to tables 1, 2 and 3 as your guide.

Table 1 Projected Daily


Revenue
Name of Business
Projected
Projecte
Cos Volume
Mark-up Sellin d
t (D)
% g Revenue
Merchandis per Average
(B) Price No. (E)
e/ Uni
(C) of Items
Products t (A) (Daily)
Sold
(Daily)
(B)= (A x
(A) (C)= (A+B) (D) (E) =(C x D)
.50)

Total

Use the calculations you have made in Table 1 to successfully


complete the information in Tables 2 and 3 and calculate the projected
monthly and yearly revenue of Aling Minda’s business.
Table 2
Projected Monthly and Yearly Revenue
Name of Business
Projected Projecte Projected
Projected
Volume d Volume
Selling Revenue
Average No. Revenu Average No.
Merchandis Price of
of Items e
e/ Items Sold
Sold
Products (Monthly (Yearly) (Yearly)
(Monthly)
)
(C)= F= (D x
30 G= (C x F) H= (D x 365 I= (C x
(A+B) days) H)
days)

Total

For Table 3, use the following assumed increases in sales every


month. From January to May, 5 percent increase from previous sales. For
the month of June, 10 percent increase from previous sales. For the months
July to December, record the same sales every month.
Table 3
Projected Monthly
Revenue
Name of Business
Month Januar Februar March April May June
y y
Revenue

Month July August September October November December


Revenue
What I Have Learned

Entrepreneurs use _ techniques to determine events


that might affect the operation of the business. Factors such as and
much be considered to avoid possible complications in the
future. To forecast revenues, it is best that the entrepreneur must be
acquainted with the
, and _ _ to determine the selling price of a product. This
way, the selling price is then multiplied to the projected volume to
arrive with the
.
The entrepreneur should always present the assumptions to
consider in projecting revenues, may it be seasonality, economic slow down
or changes in costumer preferences and the like. This will help achieve the
best educated estimate of your revenues

What I Can Do

It is understood that you now know how to calculate mark-up and


selling price of an item or merchandise. Let us try the following situation to
see if you have understood the concepts.
Kyle, a local entrepreneur is planning to sell 10 liter bottled water in
his sari- sari store. A local water purifying business in the city sells their 10
liter bottled water for 20 pesos each. Kyle wants to add 25 per cent mark up
from the original cost of 10 liter bottled water. Calculate how much mark-
up Kyle should add. Determine how much should be the selling price for 10
liter bottled water.
Lesso Forecasting the Costs to
n be
2 Incurred
What’s In

You have learned in Lesson 1 that the revenue generated by selling


RTW’s has a corresponding amount of costs incurred. This cost was the
amount of RTW before adding its mark-up price. Each piece of t-shirt has a
corresponding cost of
90.00 pesos, while each pair of jeans has a corresponding cost of 230.00
pesos. These costs are incurred each time revenues are generated. On the
other hand, the business also incurs costs in its operation, these costs are
called Operating Expenses. Operating expenses such as payment on
Internet connection, Utilities expense (i.e.Electricity), Salaries and Wages
and Miscellaneous are essential in the operation of the business; this allows
the business to continue operate in a given period of time.
Now that you have learned what cost is, let us identify the costs
and expenses incurred by the business in generating revenues.

What’s New

Have you tried recording the amount of money you spend from your
daily allowance? You might be experiencing difficulties in making your
allowance meet your daily needs as student. Try to fill in the information
below to come up with a breakdown of your daily allowance.
Breakdown on Daily
Allowance Name: _

Daily Allowance: Ᵽ
Less: Daily Expenses
Food Ᵽ
Fare _
School Supplies _
Recreation _
Others _ _
Total Ᵽ

Were you able to get a positive total? You may have spent your daily
allowance wisely and saved some of your daily allowance. Did you spend all
your allowance and ended up with a zero total? You may have spent your
allowance on expenses essential to your need as a student.
Considering your expenses as a student, a business also has expenses
necessary for its upkeep. It would be best for any business to arrive with a
positive total; this would mean profit for the business. Careful consideration
and projection of these factors could mean success for the business.

What is It
You have just learned about what cost is. This time let us identify
costs and expenses incurred by the business.
Cost of Goods Sold / Cost of Sales refer to the amount of
merchandise or goods sold by the business for a given period of time. This is
computed by adding the beginning inventory to the Net Amount of
Purchases to arrive with Cost of goods available for sale from which the
Merchandise Inventory end is subtracted.
Merchandise Inventory, beginning refers to goods and
merchandise at the beginning of operation of business or accounting period.
Purchases refer to the merchandise or goods purchased. Example:
Cost to buy each pair of Jeans or t-shirt from a supplier.
Merchandise Inventory, end refers to goods and merchandise left
at the end of operation or accounting period.
Freight-in refers to amount paid to transport goods or merchandise
purchased from the supplier to the buyer. In this case, it is the buyer who
shoulders this costs.
In a merchandising business such as Fit Mo’to Ready to Wear
Online Selling Business, the formula to compute for costs of goods sold is as
follows:

Merchandise Inventory, beginning P


XX.XX Add: Net Cost of Purchases
XX.XX Freight-in
XX.XX
Cost of Goods Available for Sale P XX.XX
Less: Merchandise Inventory, end
XX.XX Cost of
Goods Sold P XX.XX

Let us calculate the cost of goods sold of Ms. Fashion Nista’s online
selling business for the month of January.
Table 4 shows the costs incurred during the first month of operation
of Fit Mo’to Ready to Wear Online Selling Business. Since Ms. Nista get her
stocks from an online supplier, there is no need to order ahead and stock
more items. Therefore, there is no Merchandise Inventory, beginning as well
as Merchandise Inventory, end. Ready to wear items purchased online from
the supplier are then sold as soon as they arrived.
Cost of goods is calculated by simply multiplying the number of items
sold every month (300 t-shirts and 180 pairs of jeans) to its corresponding
cost per unit (90.00 pesos for every t-shirt and 230.00 pesos for every pair of
jeans). A cost in transporting the goods from the supplier to the seller (Ms.
Nista) or Freight-in is then added to Net Cost of Purchases.
Table 4
Projected Cost of Goods Sold (Monthly)
Fit Mo'to Ready to Wear Online Selling Business
Projected
Volume
Type Cost per Average No. of
Unit Projected Costs of
of Items Sold
Purchases (Monthly)
RTW's (Monthly)
(A) F = (D x 30 J = (A x F)
days)
T-Shirts 90.00 300 27,000.00
Jeans 230.00 180 41,400.00
Total 320.00 480 68,400.00

Table 5 shows how freight-in is calculated.


It is assumed that at an average, Ms. Nista pays at least 250.00
pesos for every 12 items delivered successfully by her supplier through a
courier service. Since her average order is 480 pieces every month, she pays:
480 pcs. / 12 pcs. = 40
40 x 250.00 = 10,000.00

Table 5
Freight-in paid by Ms. Nista every month
Projected Volume
No. of Items Freight In (January
Type of Average No. of Items
Sold (Daily) Only)
RTW's Purchased (Monthly)

(A) F = (D x 30 days) K = (F/12) x 250

T-Shirts 10 300 6,250.00

Jeans 6 180 3,750.00

Total 16 480 10,000.00


Let us now substitute the values from table 4 and table 5. Since
there is no Merchandise Inventory, beginning and end, let us add Cost of
Purchases and Freight-in to get the Cost of Goods Sold.
Merchandise Inventory, beginning P 00.00
Add: Net Cost of Purchases
68,400.0
0 Freight-in
10,000.0
0
Cost of Goods Available for Sale P 78,400.00
Less: Merchandise Inventory, end 00.00
Cost of Goods Sold P 78,400.00

Now that the cost of goods sold is now calculated, let us now
identify expenses that the business incurs in its operation. Operating
expenses such as Internet connection, Utilities like electricity and
miscellaneous expense are important to keep the business running. These
expenses are part of the total costs incurred by the business in its day-to-
day operation and are paid every end of the month. The operating expenses
and assumed amount are presented below:
Operating Expenses
Add: Internet Connection P 1,299.00
Utilities (Electricity) 800.00
Miscellaneous expense P
300.0
0
Total Operating Expense P 2,399.00

To calculate the total costs incurred by the business, cost of goods


sold and total operating expenses are then added. The calculation for the
costs incurred for the month of January is presented below:

Cost of Goods Sold P 78,400.00


Total Operating Expense P 2,399.00
Cost P 80,799.00
The projected monthly costs covering the first of operation of Ms.
Nista’s Fit Mo’to RTW Online Selling Business is presented in Table 6.

Table 6
Projected Monthly Costs (Year 1)
Fit Mo'to Ready to Wear Online Selling Business
Month January February March April May June

Cost of
Goods Sold 78,400.00 82,320.00 86,436.00 90,757.80 95,295.69 104,825.26

Expenses 2,399.00 2,446.98 2,495.92 2,545.84 2,596.75 2,648.69


Total Cost
&
80,799.00 84,766.98 88,931.92 93,303.64 97,892.44 107,473.95
Expenses

Month July August September October November December

Cost of
Goods Sold 110,066.52 110,066.52 104,563.20 99,335.04 104,301.79 114,731.97

Expenses 2,701.66 2,755.70 2,810.81 2,867.03 2,924.37 2,982.85


Total Cost &
Expenses 112,768.19 112,822.22 107,374.01 102,202.06 107,226.16 117,714.82
What’s More

After learning the calculations presented, you can now compute the
projected costs by month on your business concept. Use the template below
and fill in the necessary figures based on the scenario.

Mang Eduard operates a buy and sell business. He sells umbrellas


in his shop near the city mall. He gets his umbrellas from a local dealer.
Each umbrella costs 90.00 pesos each. Expecting rainy season to come,
Mang Eduard purchased 4 dozens of umbrellas every week. The supplier
then charges 200.00 pesos per dozen for freight. Mang Eduard can sell 12
umbrellas every day.
Remember to use the factors to consider in projecting revenues and
refer to tables 4, 5 and 6 as your guide. Suppose Mang Eduard purchases
and sales is the same every month, fill in the necessary information in table
6.
Table 4
Projected Cost of Goods Sold (Monthly)

Projected Volume

Merchandise Cost per Unit Average No. of Projected Costs of


/ Products Items Sold (Monthly) Purchases (Monthly)

(A) F = (D x 30 days) J = (A x F)
90

Total
Table 5
Freight-in
paid
Projected Volume
No. of Items Average No. of Freight In (1 Month
Merchandise
Sold (Daily) Items Purchased Only
/ Products
(Monthly)
(A) F = (D x 30 days) J = (F/12) x *Ᵽ200.00

Total

Table 6
Projected Monthly Costs (Year 1)

Month January February March April May June

Cost of
Goods Sold

Expenses
Total Cost &
Expenses

Month July August September October November December

Cost of
Goods Sold

Expenses
Total Cost &
Expenses
What I Have Learned

The entrepreneur should always present the assumptions to


consider in projecting costs, may it be cost of goods sold or operating
expenses. This will help achieve the best educated estimates of your costs.
The entreprenuer must clearly identify costs incurred in the business
operation. _ is the amount of
goods or merchandise sold during a period of time incurs a large portion of
the total cost of a business. The cost of goods sold can be
calculated by simply multiplying to its
corresponding
. A cost in transporting the goods from the supplier to the
seller or _ is then added to Net Cost of Purchases.

What I Can Do

Now that you know how to calculate the projected costs of a


business, look around and interview any business existing in your
community such as sari-sari stores or buy and sell business. Using the table
for Projected Costs of Goods Sold (Daily) below. Fill in the necessary figures
from the business you have selected.

Projected Cost of Goods Sold (Daily)


Business Name: _ _
Projected Volume
Goods/ Cost per Unit Average No. of Projected Costs of
Merchandise Items Sold (Daily) Purchases (Daily)

Total
Assessment

Now, that you have finished the module, let us check what you have
learned. Answer the questions given below by encircling the letter of the
correct answer.
1. Profit or Loss in computed by subtracting cost / expenses from –
a. Income/Revenue c. Sales
b. Sales Discount d. Operating expenses
2. Sales is an account title used to describe goods or merchandise sold
by a business. What nature of business uses Sales?
a. Servicing c. Merchandising
b. Barber Shop d. Both Servicing and Merchandising
3. Irene sells fashion bags online. She gets each bag for P 150.00 from a
local supplier. She then adds P 100.00 as mark-up for each bag. How
much is the selling price of each bag?
a. P 200.00 b. P 250.00 c. P 300.00 d. P 350.00
4. A merchandising business earns through –
a. Rendering services c. Donating products
b. Lending money d. Buys and sells goods
5. It is a tool that allows managers to make educated estimates on
revenue and costs of the business in order to cope up with
uncertainties of the future –
a. Estimating b. Guessing c. Forecasting d. Benchmarking
6. Which of the following businesses use Service Income in recording
revenues?
a. Beauty Salon b. Sari-sari store c. Movie House d. Hardware
7. Refers to the amount of merchandise or goods sold by the business for
a given period of time –
a. Operating Expense c. Deductions
b. Cost of Goods Sold d. Sales
8. Aling Coring sold 5 pieces of rugs. She bought the rugs for 20 pesos
and sold it for 35 pesos. How much is the total cost of goods sold?
a. P 80.00 b. P 90.00 c. P 100.00 d. P 110.00
9. Freight-in refers to the amount paid to transfer goods or merchandise
purchased from the .
a. Buyer to the supplier c. Buyer to buyer
b. Supplier to the buyer d. Supplier to supplier
10. The costs incurred through payment of utilities such as water,
electricity, internet connection is considered as –
a. Costs c. Operating expenses
b. Purchases d. Personal Expense of the owner
11. Nathaniel sells bottled water in a nearby city bus terminal. Every day
he can sell 30 pieces of bottled water at 20 pesos each. How much is
Nathaniel’ daily sales?
a. P 900.00 b. P 800.00 c. P 700.00 d. P 600.00
12. The amount added to the cost of a product to determine the selling
price is called –
a. Mark-up b. Discount c. Mark-down d. Sale

13. Lina sold all ten t-shirts for 1,500.00 pesos. Suppose she added 50.00
pesos as mark-up price for every t-shirt. How much was the cost for
every t-shirt sold?
a. P 80.00 b. P 90.00 c. P 100.00 d. P 110.00
14. Refers to goods and merchandise left at the end of operation or
accounting period.
a. Merchandise inventory, beginning c. Freight-in
b. Merchandise inventory, end d. Freight-out
15. The Total Cost and Expenses is calculated by –
a. Adding cost and expenses c. Adding revenue and expense
b. Subtracting expenses from costs d. Subtracting expense from revenue
Additional Activities

Now that you have learned how to forecast revenues and cost of the
business, investigate how these concepts are being applied by existing
businesses in your community. Using the table below, fill in the necessary
information based on your investigation.

Daily Revenue and Cost


Name of Business: _ _

Projected Projected
Volume Revenue
Projected
Cost Mark-up Selling (D) (E)
Costs of
per % Price Average
Merchandise Purchases
Unit (A) (B) (C) No. of
/ Products (Daily) (Daily)
Items
Sold
(Daily)
(B)= (A x C=A+
A D E=CxD K = (A x D)
.50) B
Ex. Bag 150.00 75.00 225.00 10 2250 1500

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