Budget Planning for Babycakes Bakery

Budget Planning for Babycakes Bakery

Babycakes Bakery is a privately owned business with location presence in the cities of New York and Las Vegas. The owner defines the bakery as a health-conscious vegan bakery whose sole mission is to meet the satisfaction of its consumers. A bakery is a form of business whose products are highly perishable and hence the need for realistic budgets on both a short-term and long-term basis. A realistic budget allows the owner to meet the daily needs of the consumers while avoiding surplus production. A realistic budget benefits the owner in promoting efficiency across all factors of production as a budgeting control tool for linking outputs with daily costs, and thus a precise process of planning function (Cardos, 2014).

A realistic budget benefits the management of a business assessment of business performance and an evaluation of future market trends. Equally, a realistic budget helps in the general motivation of the employees in a bid to meet the daily targets. Through a well-established budget, employees develop an understanding of their performance targets and plan their daily schedules to meet them on time. An owner of a business employing realistic budgets is also able to track changes and draft policies to address any arising changes in the market environment. According to the owner of Babycakes Bakery, her realistic budget serves as a deterrent to waste that may occur out of overspending and hence, easing the management functions of the business..

Table 1

Babycakes Bakery Company

Sales Budget for 4^th Quarter, 2016

During the fourth Quarter of the year, the bakery seeks to capitalize on three holidays when the sales are expected to ricochet. There are three major holidays in every month of the final Quarter of the year. During the last week of October, the company develops a special cake brand for the Halloween holiday. In November, the company will sell an exclusive cake brand for thanksgiving during the fourth Thursday of the month. During December, the bakery will put on offer a Christmas cake brand for sale over the Christmas holiday. Based on the budgetary estimates, the company seeks to make 700 extra units for the Horror Smiley cake during the Halloween holiday. In November, the Thankful Familia cake will be on sale for the Thanksgiving holiday with estimated additional sales of 800 units. During the month of December, the company estimates to make extra sales of 1200 units for the Santa Cake brand on sale during the Christmas holiday. The exclusive brand cakes will be sold over the holiday week at the cost of $4.00. The unitary budget estimates are based on the previous year’s sales and demand and online surveys of the market on the bakery’s social media platforms.  Below are the adjusted budget estimates for the fourth Quarter of the year, 2016.

Table 2

Babycakes Bakery Company

Sales Budget for Fourth Quarter, 2016

In every business, the element of uncertainty may affect its operation if it lacks a planning tool to handle the challenges of an uncertain environment. Planning and budgeting, as established in the video, differs from the period under consideration. Budgeting is a planning tool that helps an entrepreneur to develop short term plans for the more extended business plan. According to Foster (2017), a business budget is a revenue flow estimation of business operation for a period of up to one year, while a business plan is one that lasts for two or more years. In our case of babycakes bakery, the estimations indicated in table 1 and table 2 account for the budgeting function. The business expansion into Las Vegas is a planning function that was made successful by the regular budgeting of the business owner. In the business environment, managers should develop flexible short term plans to account for uncertainties such as emergency price rise of commodities and changes in demand patterns.

Woodruff (2019) establishes that a lack of flexibility in static budgets leads to business failure due to inflexibility in addressing changes in the environmental conditions of business. Static budgets refer to a form of a budget that lasts for an extended period, a year in most cases, without a change. A static budget fails to meet the features of a flexible budget, which guarantees adjustments to the business model as part of the costs behavior theory. Shim et al. (2011) establish that costs of production in a business cannot remain fixed throughout a particular financial period and thus the need to develop short term budgets to address changes as they arise. Flexible budgets are essential for a business and would benefit Babycakes bakery in minimizing costs and maximizing profits across both business locations.

References

Foster, T. A. (2017). Budget planning, budget control, business age, and financial performance in small businesses.

from https://www.youtube.com/watch?v=frh3I2rVDzs

https://smallbusiness.chron.com/advantages-flexible-budget-57105.html

Shim, J. K., Siegel, J. G., & Shim, A. I. (2011).Budgeting basics and beyond (Vol. 574).JohnWiley & Sons.

Wiley.(2011). Budgetary Planning featuring Babycakes *FULL VIDEO* [Video]. Retrieved

Woodruff, J. (2019).The Advantages of a Flexible Budget. Retrieved 26 February 2020, from