Now that you have identified what business to undertake and are familiar with the tools and materials needed in the operation of your business, let us apply what you have learned in the previous module by forecasting the revenues and costs incurred in your business. You might probably be wondering how profits are computed. This module will help guide you realize the revenues and profits of your chosen business.
Revenue is a result when sales exceed the cost to produce goods or render the services. Cost on the other hand simply refers to the amount of money used to produce or manufacture goods/merchandise as well as costs incured in selling the goods/merchandise. How much revenues and costs incurred in the operation of the business, how are these projected, and how are these used to compute profit/loss of the business shall be learned in this module.
This module is divided into two lessons:
- Lesson 1 – Forecasting the revenues of the business
- Lesson 2 – Forecasting the costs to be incurred
To be able to successfully complete this module, previous knowledge in multiplying numbers will best help.
Why forecast? We often watch news as Kuya Kim reports the direction of the typhoon in the next 2 days, what Kuya Kim is doing is giving us information taken by satellites and gives us the direction of the typhoon. In weather forecasting, the reporter is giving us advance information that could help us prepare and be ready for upcoming typhoon. This way, risks such as accidents, devastation of properties and loss of life may be prevented.
Forecasting is a tool used in planning that aims to support management or a business owner in its desire to adjust and cope with uncertainties of the future. Forecasting depends on data from the past and present and to make meaningful estimates on revenues and costs. Forecasting revenues and costs is the same as weather forecasting, though forecasting revenues and costs is in the context of business. Entrepreneurs use forecasting techniques to determine events that might affect the operation of the business such as sales expectations, costs incurred in the business as well as the profit that the business is earning. Making informed estimates reduces risks that might be experienced by the entrepreneur in the future.
In this module, you will be making informed estimates about revenues and calculate estimates involving costs incurred by the business. Factors affecting forecasting will be discussed to better help you in making projections.
After carefully studying the contents of this module, you should be able to:
- identify essential factors in forecasting revenues and costs;
- calculate mark-up and selling price of a product or merchandise;
- compute projected revenues;
- compute projected costs; and
- create a table showing projected revenue and costs.
- appreciate the significance of forecasting revenues an costs to a business.
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