1.2.4 Profit Budget
It is now time to produce the profit budget. This budget is used to predict financial performance. We have the budgeted figures for sales and expenses from previous budget calculations and these are included in the profit budget. Our profit budget will require figures that are converted into percentages so that management can easily assess how well the business is meeting its objectives.
For example, the profit budget for the business requiring a profit after tax to sales figure of 10%, with sales of $20 million, would look like this:
Sales |
20,000,000 100% |
Cost of Sales - |
7,600,000 38% |
Gross Profit |
12,400,000 62% |
Expenses - |
10,000,000 50% |
Net Profit = |
2,400,000 12% |
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