Entrep M7Q2
Entrep M7Q2
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.
1. ____________ __________
2. ____________ __________
3. ____________ __________
How close were your estimates compared to the actual time? Did your estimate fall 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.
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 a regular basis had helped you arrive with an estimate that was very close to
the actual time of arrival.
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For 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 a 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 include Sales and Service
Income. Sales is used especially when the nature of business is merchandising or
retailing, while Service Income is used to record revenues earned by rendering services.
Now that you know about revenue, Let us determine the factors to consider in
forecasting revenues.
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 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 behavior give the entrepreneur a
better perspective about the market. The entrepreneur should always be keen in
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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.
4. 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 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
determine 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 it 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 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:
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 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).
For example, in Table 1 the daily revenue is 3,420.00. To get the monthly
projected revenue it is multiplied by 30 days. Therefore,
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Projected Yearly Revenue = Projected Daily Revenue x 365 days
Table 2
Projected Monthly and Yearly Revenue
Fit Mo'to Ready to Wear Online Selling Business
Projected Projected
Volume Projected Volume Projected
Average Revenue Average Revenue
Selling
No. of No.
Type of Price
Items of Items
RTW's
Sold (Monthly) Sold (Yearly)
(Monthly) (Yearly)
F= (D x 30 H= (D x 365
(C)= (A+B) 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
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 the
previous month by 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 a 10 percent increase in revenue from November to December.
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Projected Monthly Revenue (Increase) = 5,130.00
Table 3
Projected Monthly Revenue Fit Mo'to Ready to Wear Online Selling Business
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 of 5% from previous revenue
November Increase of 5% from previous revenue
December Increase of 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 by these revenues, as these are just gross revenue, this is not the final
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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.
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.
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
Volume Projected
Cost (D) Revenue
Mark-up Selling (E)
per Average
____% Price
Merchandise/ Unit No. of
(B) (C)
Products (A) Items
Sold (Daily)
(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 Table 2 and calculate the projected monthly and yearly revenue of Aling Minda’s
business. For Table 3, use the following assumed increases in sales every month. From
January to May, 5 per cent increase from previous sales. For the month of June, 10 per
cent increase from previous sales. For the months July to December, record the same
sales every month.
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Table 2 Projected Monthly and Yearly Revenue
Name of Business ___________________________
Projected Projected
Projecte
Volume Volume Projected
d
Selling Average No. Revenue Average No. Revenue
Merchandise/ Price of Items of
Products Sold (Monthly) Items Sold (Yearly)
(Monthly) (Yearly)
(C)= F= (D x 30 H= (D x 365
G= (C x F) I= (C x H)
(A+B) days) days)
Total
Table 3
Projected Monthly Revenue
Name of Business ___________________________
Month January February March April May June
Revenue
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costumer preferences and the like. This will help achieve the best educated
estimate of your revenues
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 situations to see if
you have understood the concepts.
1. Now that you have learned how to forecast revenues 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.
Total
1.
2.
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 a student. Try to fill in the information below to come up with a breakdown
of your daily allowance.
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 needs as a student.
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 these cost.
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:
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 gets 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.
Table 4
Projected Cost of Goods Sold (Monthly)
Fit Mo'to Ready to Wear Online Selling Business
Projected Volume
Cost per Average No. of
Type of
Unit Items Sold Projected Costs of
RTW's
(Monthly) Purchases (Monthly)
(A) F = (D x 30 days) K = (A x F)
T-Shirts 90.00 300 27,000.00
Jeans 230.00 180 41,400.00
Total 320.00 480 68,400.00
Table 5
Freight-in Paid by Ms. Nista Every Month
Projected Volume
No. of Items Average No. of Freight In
Type of
Sold (Daily) Items Purchased (January Only)
RTW's
(Monthly)
(A) F = (D x 30 days) J = (F/12) x 250
T-Shirts 10 300 6,250.00
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.
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, and 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 amounts are presented below:
Operating Expenses
Add: Internet Connection P 1,299.00
Utilities (Electricity) 800.00
Miscellaneous expense P 300.00
Total Operating Expense P 2,399.00
Cost of Goods
Sold 78,400.00 82,320.00 86,436.00 90,757.80 95,295.69 104,825.26
Cost of
Goods Sold 110,066.52 110,066.52 104,563.20 99,335.04 104,301.79 114,731.97
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.
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
are the same every month, fill in the necessary information in Table 6.
Table 4
Projected Cost of Goods Sold (Monthly)
Projected Volume
Cost per Average No. of
Merchandise/
Unit Items Sold Projected Costs of
Products
(Monthly) Purchases (Monthly)
(A) F = (D x 30 days) K = (A x F)
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)
F = (D x 30 days) J = (F/12) x
*Ᵽ200.00
Total
Table 6 Projected Monthly Costs (Year 1)
Cost of
Goods Sold
Expenses
Total Cost &
Expenses
Cost of
Goods Sold
Expenses
Total Cost &
Expenses
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 sarisari
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.
Total
1. 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.
Projected Projected
Volume Revenue
Cost Mark- (D) (E) Projected
Selling
per up Costs of
Price Average
Merchandise/ Unit ____% Purchases
(C) No. of
Products (A) (B) (Daily)
Items (Daily)
Sold
(Daily)
(B)= (A x C=A+ E=Cx
A D K = (A x D)
.50) B D
Ex. Bag 150.00 75.00 225.00 10 2250 1500