Use Babycakes Bakery In Los Angeles For The Budget Plan ✓ Solved

1. Use Babycakes (a bakery in Los Angeles) for the budget pl

1. Use Babycakes (a bakery in Los Angeles) for the budget planning and control report. Briefly discuss each main reason the owner needs a budget using specific company and product details. Include possible outcomes with a good budget versus having no budget.

2. Prepare a sales budget for the Babycakes LA store for the 4th quarter of 2016. Present each month: October, November, and December, and a total for the quarter. Use one-half of the Valentine's Day (one day) sales as the basis for a usual day. Include changes needed due to Halloween, Thanksgiving, and Christmas. Discuss the budget details in the report. Include the actual budget as an appendix with all data and calculations used.

3. Explain the benefits of using a flexible budget based on the budget you prepared for the 4th quarter of 2016.

4. Explain the modifications and corrective actions needed to correct challenges and the expected results.

5. Use at least three relevant academic-quality references and apply APA in-text citations and references.

Paper For Above Instructions

Executive Summary

This report prepares a Q4 2016 sales budget and control plan for Babycakes, a boutique Los Angeles bakery specializing in cupcakes, specialty celebration cakes, and seasonal packaged gift items. The analysis explains why the owner needs a budget, presents a month-by-month sales budget (October–December 2016) using one-half of Valentine's Day one-day sales as the baseline daily sale, discusses adjustments for Halloween, Thanksgiving, and Christmas, describes the advantages of a flexible budget, and recommends corrective actions to address shortfalls or unexpected demand (Horngren, Datar, & Rajan, 2015).

1. Why the Babycakes Owner Needs a Budget

A formal budget is essential for Babycakes for several reasons: cash-flow planning, inventory and waste control, labor scheduling, pricing and product-mix decisions, capital and equipment planning, and performance evaluation. First, cash-flow forecasting helps ensure ingredients (flour, butter, specialty fillings) are purchased on time and payroll obligations are met during seasonal spikes (Shim & Siegel, 2008). Second, bakery products are perishable; budgeting supports inventory turnover targets and reduces spoilage through tighter ordering and production planning (Drury, 2013). Third, labor represents a large variable cost in a bakery; budgets guide staffing levels for peak holiday weeks versus slow weekdays (Hilton & Platt, 2013). Fourth, a budget informs promotional decisions and product pricing for high-margin items (custom cakes) versus low-margin everyday items. Outcomes with a good budget include predictable cash flows, controlled food costs, optimized staffing, and the ability to capture holiday demand; without a budget Babycakes risks stockouts during peaks, excessive waste in slow periods, cash shortfalls, and poor profitability (Kaplan & Atkinson, 1998).

2. Sales Budget: Q4 2016 (Assumptions and Results)

Basis and assumptions: Historical one-day Valentine’s Day sales for the LA store are assumed to be $4,000 (peak day). The assignment requires using one-half of that as a usual day baseline: usual_day = $2,000. Adjustments for seasonal events are applied conservatively and shown in the appendix calculations. Assumed multipliers: Halloween (Oct 31) = +150% incremental (total 250% of usual), Thanksgiving period (Thu–Sun) = +60% per day for four days in November, Christmas season Dec 15–25 = +120% per day for eleven days in December.

Monthly calculations (summary):

• October (31 days): base = 31 × $2,000 = $62,000. Halloween extra = $2,000 × 1.5 = $3,000 additional. October total = $65,000.
• November (30 days): base = 30 × $2,000 = $60,000. Thanksgiving period extra = 4 days × ($2,000 × 0.6) = $4,800. November total = $64,800.
• December (31 days): base = 31 × $2,000 = $62,000. Christmas surge extra = 11 days × ($2,000 × 1.2) = $26,400. December total = $88,400.
• Quarter total Q4 2016 = $65,000 + $64,800 + $88,400 = $218,200.

Discussion: The budget allocates expected sales by month and highlights where temporary staffing, ingredient ordering, and packaging capacity must be increased. For example, December requires extra flour, specialty chocolate, and cake boxes well ahead of Dec 15 to avoid supplier lead-time issues (SBA, 2016). The LA storefront should plan part-time hires and overtime for peak days to avoid lost sales (National Restaurant Association, 2016).

3. Benefits of a Flexible Budget

A flexible budget based on actual volume rather than a static plan provides several advantages for Babycakes. It allows management to scale variable costs (ingredients, hourly labor, delivery fuel) proportionally to realized sales, improving variance analysis and managerial control (Horngren et al., 2015). Flexible budgets make it possible to compute meaningful spending variances and identify whether cost overruns are due to inefficient operations or simply higher volume (Drury, 2013). For Babycakes, using a flexible budget during Q4 enables quick adjustment of purchasing and labor in response to earlier-than-expected Christmas orders or sudden event catering requests, improving responsiveness while protecting margins (Hilton & Platt, 2013).

4. Modifications and Corrective Actions

Anticipated challenges and corrective actions:

• Lower-than-budget sales: implement targeted promotions (social media holiday bundles, gift-card incentives), shorten hours on slow weekdays, reduce overproduction of perishable items, and switch to just-in-time ordering to conserve cash (Shim & Siegel, 2008). Expected result: improved cash flow, reduced waste, and maintained gross margin.
• Inventory shortages during peaks: establish safety stock contracts with key suppliers, pre-bake and freeze specific SKU components, and prioritize high-margin custom orders. Expected result: reduced lost sales and maintained customer satisfaction.
• Unexpected high demand: accelerate hiring of trained temporary bakers, renegotiate short-term delivery with local couriers, and introduce limited-time price premiums for rush custom orders. Expected result: capture incremental revenue while controlling overtime costs.
• Variance monitoring: adopt weekly flexible-budget variance reports comparing actuals to the flexible budget, enabling management to act within days rather than weeks (Kaplan & Atkinson, 1998).

Conclusion

A formal, data-driven budget combined with flexible budgeting methods will allow Babycakes to navigate Q4 seasonality, control perishables and labor costs, and capture holiday demand without compromising margins. The sales budget for Q4 2016 projects $218,200 in revenue under the assumptions stated; managers should monitor weekly variances, maintain supplier communication, and be ready to implement the corrective actions outlined above to keep operations profitable and responsive (BLS, 2016; IBISWorld, 2016).

Appendix: Detailed Sales Budget Calculations (Q4 2016)

References

• Drury, C. (2013). Management and Cost Accounting. Cengage Learning.
• Hilton, R. W., & Platt, D. E. (2013). Managerial Accounting: Creating Value in a Dynamic Business Environment. McGraw-Hill Education.
• Horngren, C. T., Datar, S. M., & Rajan, M. V. (2015). Cost Accounting: A Managerial Emphasis. Pearson.
• Kaplan, R. S., & Atkinson, A. A. (1998). Advanced Management Accounting. Prentice Hall.
• Shim, J. K., & Siegel, J. G. (2008). Budgeting Basics and Beyond. John Wiley & Sons.
• Small Business Administration. (2016). Start-up Costs and Budgeting for Food Businesses. U.S. SBA. Retrieved from https://www.sba.gov
• National Restaurant Association. (2016). State of the Restaurant Industry Report. NRA.
• IBISWorld. (2016). Bakeries in the US Industry Report. IBISWorld.
• Bureau of Labor Statistics. (2016). Consumer Expenditure Survey: Seasonal Patterns. U.S. Department of Labor.
• Parsa, H. G., Self, J. T., Njite, D., & King, T. (2005). Why Restaurants Fail. Cornell Hospitality Quarterly.