Question

Marilyn and Michelle sells a foam mattress cover that allows patients to sleep better after surgery. Co-founders Marilyn Collins and Michelle Logan stress the importance of planning and budgeting for business success.

Required

1. How can budgeting help Marilyn and Michelle efficiently develop and operate their business?
2. Marilyn and Michelle hope to expand their business. How can a budget be useful in expanding a business’s operations?

Short answer

1. Marilyn and Michelle may use budgeting to help them expand and run their firm more efficiently.
2. Budgeting may be beneficial in increasing a business operation.

Step-by-step solution

Meaning of Budget

A budget is a forecasted financial strategy for the future,andmanagement uses it as an internal tool. It is prepared for a certain period.Budgeting is the practice of planning for the future. This procedure aids managers in planning for the future and maintaining control over the organization's operations.

(1) Explaining how budgeting can help Marilyn and Michelle efficiently develops and operates their business

Budgeting can help Marilyn and Michelle grow and operate their business efficiently because budgets are so crucial to running a business as it helps manage costs to determine if profit targets are within reach or not.

For example, one can estimate the next quarter's budget, peak periods, and scheduled stock and labor to handle sales volume. Therefore budgeting can help plan holiday marketing activities and inventory pick-up for slower periods.

Marilyn and Michelle's business budget will help identify profits and list the expenses they will incur to reach their goals.

(2) Explaining how a budget can be useful in expanding a business’s operations

Marilyn and Michelle want to grow their company. As a result, budgeting may be beneficial in increasing a business operation in the following ways:

A realistic, thoughtful, and accurate budget can give valuable insight into the broader business strategy – for example, the parts of the business that are not performing well, use resources in these parts instead of using them for more profitable projects.

Looking for expansion, evaluate new ventures using a range of budgeted and projected sales figures and costs from optimistic to hopeless. It can help quickly understand each one's potential and help businesses expand safely.