1. To determine if a business is successful, you must look at costs, revenues and

profits. Some may think that revenues and profits are the same thing, but they are not. Companies can have very high sales numbers, but this does not automatically translate into profits. If a business owner does not understand the difference between revenue and profit, they may not realize if their company is in trouble. Normal business activities are intended to generate income.

Stunning Sorbet is a frozen yogurt business in Los Angeles. You are asked to create an operating budget sheet for this company for the period of February 2021. You need to determine whether they can make a profit from a summer ice cream bar business during winter. They charge $1.50 per ice cream bar and sold 36,000 ice cream bars in January. They believe they could sell another 36,000 ice cream bars in February as well! The cost of the ice cream barswholesale purchase, delivery, storage, and so oncomes to about $0.30 per bar. The owner has indicated that his other main costsleasing the building, license, local business association fee, and insurancecame to about $16,000 per month. The ice cream machine was bought by the company 7 years ago for 25,000$. This kind of machines usually last for 10 years, after that they stop performing well or breakdown. The machine is being depreciated each year over its useful life.

There has been and will be repairs scheduled to be done to the machine on the 15th of February 2021 for 567$.

Based on this limited information, you could determine a rough estimate of the revenue, costs, and profit they have if they were to repeat the outcomes.

- Calculate the Revenue

- Determine what the costs are (which ones are variable or fixed)

- Calculate the total of the variable costs

- Calculate the total of the fixed costs

- What is the total of all costs?

- Determine is you have any depreciation. If yes, dont forget to calculate the allocation cost so you can add it to the B.O sheet.

TIP: Make sure you know that the equation usually gives you an amount for allocation for one year, you have to divide it into months and include it on the FEB B.O sheet.

- What is the profit?

- In your opinion, are there any costs or expenses that can be reduced? Can the revenue be higher if they were to change something? If so, what?

- After gathering all this information, using the next page, draft an operating budget sheet for the month of February 2021.