Budget Basics
What is a business budget?
A plan for managing money.
Give an example of a fixed expense.
Rent, insurance, or salaries.
What is revenue?
The total money a business earns.
What is the break-even point?
The point where total revenue equals total expenses.
You own a lemonade stand. Name one fixed expense.
Lemonade stand fixed expense: table, pitcher, or stand materials.
Name one reason why budgeting is important.
Helps track income and expenses to avoid overspending.
Give an example of a variable expense.
Utilities, materials, or advertising costs.
How do you calculate profit?
Profit = Revenue - Expenses.
Why is the break-even point important for a business?
It helps businesses know when they will start making a profit.
A pizza shop spends more on cheese in summer. Is this expense fixed or variable?
Variable, because cheese costs change based on demand.
What is the main goal of a business budget?
To ensure a business stays profitable.
How do fixed and variable expenses impact profit?
Fixed costs stay the same; variable costs change with sales.
If a company earns $5,000 in revenue but has $3,000 in expenses, what is its profit?
$2,000 profit.
How do you calculate the break-even point?
Fixed Costs ÷ (Selling Price - Variable Cost per Unit).
A store sells hoodies for $20 each. If making one hoodie costs $10, what is the profit per hoodie?
$10 profit per hoodie.
What happens if expenses are greater than revenue?
The business will lose money or go into debt.
Which type of expense is rent?
Fixed expense.
What happens when revenue is lower than expenses?
The business is operating at a loss.
If a business has $500 in fixed costs and profit $5 per unit, how many units must it sell to break even?
100 units (500 ÷ 5).
A business cuts its advertising budget to save money. What could happen?
The business may lose customers or brand visibility.
Explain the difference between revenue and profit.
Revenue is total earnings; profit is revenue minus expenses.
Which type of expense is inventory costs?
Variable expense.
If you sell 100 products at $5 each, what is the total revenue?
$500 total revenue.
What happens if a business never reaches its break-even point?
The business will not be profitable and may have to shut down.
You start a T-shirt business. What are 2 things you must include in your budget?
Expenses (materials, rent, advertising) and revenue projections.