Raju, a second-year business owner, has learned a bit about budgeting but needs some more

insight. At the start of the year, she made a budget for selling 2,000 umbrellas, her main product.

Raju's prices vary based on the weather (she increases prices on rainy days and offers discounts on

sunny days), but she budgeted at an average sale price of $8 per umbrella.

It is now near the end of the year and Raju expects the final sales number to total 2,200 umbrellas at

a price of $7 each. She suspects that her variable expenses for umbrella purchase, design additions, and

marketing, budgeted at a total of $10,000, are over by 10%. However, she considers the increased costs

to be direct results of higher sales volume which is a good thing.

Raju believes she fixed costs for her store have remained on budget. She decided not to track fixed

costs for umbrellas since she does not know if things like employee salary, store rent, etcetera can be

allocated accurately.

Give Raju some advice on budgeting, including discussion of how flexible and static budgets can

impact her specific situation. Also, analyze her business situation and make recommendations