Republic of the Philippines
DEPARTMENT OF EDUCATION
Region I
Schools Division of Pangasinan II
PANGANIBAN NATIONAL HIGH SCHOOL
Tayug
LEARNING MATERIAL
ENTREPRENEURSHIP
QUARTER 4, WEEKS 1-4
MELC: Demonstrate understanding of the 4Ms of operations
K to 12 BEC CG: TLE_ICTAN11/12EM-Ia-2
Prepared by:
RANDY S. GARCIA
SHS Teacher III
Content Evaluated by:
Language Evaluated by:
AMALYN B. MACUSI
Teacher III
CHRISTOPHER M. RABARA
Teacher III
Reviewed by:
REBECCA C. CABIENTE
Master Teacher I
JANET V. CABIENTE
Principal II
General Instruction: Read and understand the lesson before you are going to answer the
activity sheets that follow.
Lesson 4: FORECAST THE REVENUES OF THE BUSINESS
What is a Revenue Forecast?
Essentially, a revenue forecast is an educated prediction or estimation for the upcoming year
about how much money your company is likely to bring in. This allows you to determine how
much you can spend, and what your margins will be overall. Revenue Forecast is the
calculation of the quantity of cash that a company will receive from sales in products or services
during a particular time. The business revenue forecast is an essential part of business planning
though it is not intended to give actual figures for each year's earnings.
Once you have a better idea of the total amount of money coming in and out of your business,
you can build a more relevant budget to your long-term goals.
If you are at a point during the year where you might get off your track, your forecasts can
serve as a useful reminder of where you should be – better affording you the ability to
understand deviations from the track you have set.
Forecasting is also an essential tool to help plan for your growth in your business. Whether
with new hires, launching campaigns, or cutting costs when business slows down. You can
better see how your money needs to align in timing with your initiatives.
There are two main types of revenue forecasting:
Judgment forecasting – this uses your gut feeling based off of your experience and intuition
in the industry.
Quantitative forecasting – this scientific method uses your past data and revenue (or if
you’re a startup, then data from similar businesses) to predict changes and track trends.
Purpose of forecasting revenue
1. Can help you discover why, when, where, and how of your sales activities.
2. It can assist you to come up with a better strategy to maximize your profit.
3. It can also help with your cash flow management through planning your capital
needs to keep away from lacking payments, dropping suppliers and investors, and adverse
credit history.
4. It can assist to determine profit margin and contribution to gross profits.
5. It can manage production scheduling to prevent bottlenecks that would possibly
cause lost income and help to spot potential downtimes that cause to pay workers.
6. It can also identify peak hours.
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SIMPLE STEPS TO FORECAST REVENUE
1. Choose which forecasting methodology primarily based on the business is needed,
how much time you have, and your degree of confidence in the data.
a. TOP-DOWN FORECASTING. It is a method of estimating a company’s future
performance by starting with high-level market share (your TAM-total available market),
potential market share and down to revenue. For example, if your company is selling a Mobile
Phone, you may look at the number of consumers who have purchased mobile phones.
b. BOTTOM-UP FORECASTING- It is a method of estimating company’s future
performance via starting with low-level company data and working up to revenue.
**You can calculate the company’s estimated revenue by multiplying the number of
orders and the average price.
c. QUALITATIVE FORECASTING- It is an estimation methodology that uses
professional judgment instead than numerical analysis. It depends upon the information of
experienced and expert consultants to provide insights into future outcomes.
d. QUANTITATIVE FORECASTING- It is a statistical approach to make predictions
about the future which makes use of numerical measures and prior results to predict future
events. They are highly structured on mathematical calculations.
2. Identify and break down your revenue drivers so that you can forecast them later.
These are the metrics that will drive your revenue:
● Salespeople
● Marketing
● Number of customers
● Average frequency of purchase (how often a single customer buys your product)
● Average purchase volume (how many products a single customer buys)
● Variety of products Amount sold of each product
● Prices of each product
● Sales cycle (how long from start to finish does it take a salesperson to close a sale)
3. Project the drivers and use the drivers to forecast the revenues. And compute the
Sales Revenue.
Formula for Revenue: Price of per unit x number of unit sold = revenue
Forecast Expenses Incurred
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Businesses incur more than a few types of expenses. An expense is the cost of
operations that a business incurs to generate revenue (Liberto 2020). It is the cost of doing
business; the sum of all activities that result in a profit. It is necessary to recognize the
distinction among expenditure, expense and cost. Expenditure refers to the amount incurred in
a long term period by the company to purchase and increase the value of fixed assets (Morah
2019). On the other hand, expenses refer to the costs that are ongoing payments incurred on a
short term basis and used to generate revenue. Cost, it refers to the amount of money spent on
the production or creation of goods or services (Cambridge Dictionary n.d.). As the diagram
above illustrates, there are several types of expenses. The common way to categorize them is
into operating vs. non-operating (Adkins 2019) and fixed cost vs. variable cost (Fresh Books
Accounting n.d.).
OPERATING
EXPENSE
An expense a
business incurs in
order to keep
running the
operation.
NON-OPERATING
EXPENSE
This is not related to
a company’s day-today operation or
manufacturing.
FIXED
COST
An expense that
remains constant for
a period of time
irrespective of the
level of outputs.
Does not vary
directly to sales.
Payroll Insurance
fees License fees
Rent Marketing
(advertising and
promotional fees)
Accounting fees
Building
maintenance and
repairs Utilities
Attorney’s fees
Property Taxes
Travel expenses
Depreciation
Amortization Bank
fees Lawsuit
payments and
associated fees
Currency exchange
rate Restructuring
costs Obsolete
inventory Interest
Taxes
Rent Salaries and
wages Loan
payments
VARIABLE COST
An expense that
changes directly and
proportionally to the
changes in business
activity level or
volume. This also
refers to the actual
costs of making the
product or providing
the service.
Transaction fees
Commissions
Marketing and
advertising Direct
labor Taxes Costs of
goods sold Materials
and supplies
Packaging
You must forecast each expense of the business including:
Startup Expenses- These are the expenses incurred for the duration of creating a new
business such as pre-operating expenses (Morah 2019).
Fixed Costs - All the overhead costs of the business.
Variable Costs - All of the costs that vary with the business.
Compute Profits
The terms "profit" and "income" are often used interchangeably in day-to-day life.
Profit is generally understood to refer to the cash that is left over after accounting for expenses
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(Kenton 2020). Computing a profit or loss has to be completed by all companies of any size,
form the small enterprise to large enterprise. It is in a simple calculation Total Revenue –
Total Expenses = Profit.
1. Compute all the revenue from sales of goods and services
Example: You owned school supplies. September 1, 2020, you sold 10,000 worth of
bond papers to Sapang Bato National High School. September 2, 2020, you sold to Angeles
City National Trade School 10,000 worth of bond papers and to Sapang Bato Elementary
School 15, 000 worth of ink and bond papers. September 3, 2020, you sold 10,000 worth of
school supplies from various customers.
DATE
ITEM/S
AMOUNT
September 1, 2020
September 2, 2020
September 3, 2020
Bond Papers
Bond Papers and ink
School Supplies
Total Revenue
10,000
25,000
10,000
45,000
2. Compute all the costs and expenses for the accounting period ( 1 month). For
example: Let’s say your school supplies business spent 3,500.00 for paying your store rentals
and 2,000.00 for your saleslady salary. In this case, your total expense is 3,500.00 + 2,000.00
= 5,500.00.
3. Subtract all the expenses from the revenue. You just simply subtract your expenses
to your sales revenue. The money left represents your business profit. In the example, you
already computed your total revenue and total expenses from your school supplies business.
Subtracting your total expenses from your total revenue gives you 45,000 – 5,500 = 39, 500
profit.
4. Note that a negative result for profit is called net loss.
Should You Update Your Revenue Forecast?
It’s simply a fact: nobody can forecast revenue with 100% accuracy. That’s not the point.
The idea is to lay down important assumptions that can be regularly monitored and compared
to the performance of your business overall.
A forecast is a living document, meaning that it changes with the times. Ideally, you would
keep your revenue forecasts up to date once per month, or every quarter, to ensure that they
are consistently in line with your goals.
Why Is Revenue Forecasting Important?
Why is revenue forecasting important? Because it shines a light on the state of your
business in the past (and moving forward). It helps you plan effectively, make strong decisions,
and take your business to new heights – without feeling in the dark.
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The best part is that forecasting is driven by concrete information and actionable
insights.This takes your financial future from wishlist to business plan.
The Principles of Revenue Forecasting
Revenue forecasting is an important part of any business plan, because it can help
strategize how much and how quickly you intend on growing your company.
That said, it is also the most difficult to estimate. This is counter to things like costs and
funding, which are far more under your own control.
Let’s think of revenue forecasting in terms of three principles:
1. Analysis
2. Management
3. Strategy
First, you have analysis. This is the first thing that forecasting requires – a deep dive into
your numbers, where you’ve been, and what you might need moving forward. You need to
make sense of where your money is going, and where it could be headed.
Next is management. Revenue forecasting always loops back to the day-to-day structures
that are in place to manage the money going in and out of your business. Therefore, it’s not
just about where your money might go – but where it is currently heading.
Lastly, we have strategy. When it comes to discussing revenue forecasting, it all
comes back to growth. Understanding where you might be making your money helps inform
decisions around your business. This could include marketing, product offerings, or who you
have on staff.
It’s a holistic mix, and it is absolutely essential to the livelihood of your business.
How Often Should You Forecast?
Establishing meaningful timelines can help power decisions in your business, and can
play a vital role in understanding if you are growing at all. Typically, your first revenue forecast
should occur as part of your overall business plan. The best way to start is by forecasting out 3
– 5 years, with updates each and every year.
Following that, you maintain what is known as a “rolling revenue plan” – this
forecasts for the next four quarters, and is updated on a monthly basis.
Last, but not least, you keep track of your monthly revenue forecast versus what you
actually brought in (this can be done daily or weekly).
It may seem like a great deal of forecasting, but it is essential that you maintain
continuous knowledge of whether your forecasts are hitting their targets.
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REFERENCES:
A. Online Sources
https://board.budgetbakers.com/blog/why-is-revenue-forecasting-important/
https://quickbooks.intuit.com/r/revenue/forecast-revenue/
https://board.budgetbakers.com/blog/the-best-revenue-forecasting-methods-for-yourbusiness/
https://quizizz.com/admin/quiz/5b9b9883f5e37d0019dca235/finance-costs-revenue
https://www.fundera.com/blog/revenue-forecasting-2
https://www.academia.edu/45032285/ENTREPRENEURSHIP_12_Q4
https://quizizz.com/admin/quiz/592effa5f88b0a1100f072f5/chapter-18-costs-revenues
https://www.bbc.co.uk/bitesize/guides/zxq2hyc/test
https://quizizz.com/admin/quiz/5e5fc632580372001b407694/costs-and-revenue
https://quizizz.com/admin/quiz/607451b079a790001bbe6c9a/breakeven-point
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Name: __________________________________________________ Date: _____________
Grade-Section: ___________________________________________ Score: ____________
Quarter4-ENTREPRENEURSHIP
Worksheet No. 4
Title of the Activity #1: CHOOSE THE BEST
Most Essential Learning Competency: Demonstrate understanding of the 4Ms of
operations
K to 12 BEC CG: TLE_ICTAN11/12EM-Ia-2
Directions: Read each statement carefully. Write the letter of the best answer
on the space provided before each number.
_____ 1. The income (amount of money) a business receives for in exchange for a product or
service
A. profit
B. loss
C. sales revenue
D. total expenses
_____ 2. Fixed Cost + Variable Cost =
A. Breakeven point
B. Variable cost
C. Total costs
D. Fixed costs
_____ 3. A negative difference between the revenues taken in by a business and the costs of
operating a business (when a business spends more than it makes)
A. breakeven
B. closed
C. loss
D. profit
_____ 4. Costs that must be paid regardless of how much of a good or service is produced.
They do not change in the short term, regardless of output are called
A. Variable costs
C. Fixed costs
B. Total costs
D. Unit costs
_____ 5. Costs that change based on the amount of goods and services produced.
A. Variable costs
C. Fixed costs
B. Total costs
D. Unit costs
_____ 6. Which of the following is a reason for managers knowing the costs of the business?
A. They will be able to increase output.
B. It will help them fix the price of the product(s).
C. The information would have to be published to shareholders.
D. Costs will tell the managers what the firm's profits are.
_____ 7. Raw materials, packaging, wages/labor costs are examples of _____.
A. Variable costs
C. Fixed costs
B. Total costs
D. Unit costs
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_____ 8. A positive difference between the revenues taken in by a business and the costs of
operating a business (when a business makes more than it spends).
A. breakeven
B. cost
C. loss
D. profit
_____ 9. Rent, administrative costs, advertising, employee salary are examples of ...
A. Variable costs
C. Fixed costs
B. Total costs
D. Unit costs
_____ 10. Which one of the following costs is most likely to be variable for a fast food
restaurant?
A. the salary of the manager
B. the rent of the restaurant
C. the cost of the food supplies
D. the machinery used to cook the food
_____ 11. The best definition of variable costs is:
A. They vary with the number of units produced.
B. They vary over time.
C. They vary with the prices charged by suppliers.
D. They vary with tax rates set by government.
_____12. 4. If variable costs are P6 per unit,then total variable costs of producing 7,000 units
will be:
A. P7,000
B. P70,000
C. P2,100
D. P21,000
_____ 13. The best definition of fixed costs are those that do not vary with:
A. time
C. seasons
B. number of workers
D. output
_____ 14. The total revenue of a business is:
A. the same as profit
B. equal to total costs
C. quantity of units produced times unit production cost
D. quantity of units sold multiplied by the selling price.
_____ 15. The break-even level of output is that number of units where:
A. profit is at its highest level
B. variable costs equal revenue
C. total costs equal revenue
D. variable costs equal fixed costs
_____ 16. A product sells for P14. Variable costs are P6.Fixed costs are P120,000. Breakeven output is:
A. 15,000 units
C. 120,000 units
B. 40,000 units
D. 90,000 units
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_____ 17. The best definition of the contribution made by a product is:
A. the profit made on each item sold
B. the revenue gained from selling each item
C. the difference between price and variable cost
D. the difference between price and fixed cost
_____ 18. What is a cost?
A. Something the company receives
B. The price of a product
C. Something the company must pay
D. Something the company sells
_____ 19. What is a variable cost?
A. A cost which does not change
B. A cost which they must pay even if they produce nothing
C. A cost which changes the more or less the business produces
D. A cost the business pays when they start
_____ 20. What is the formula for Revenue?
A. Total Sales + Costs = Revenue
B. Number of Sales x Price per unit = Revenue
C. Price per unit x Total Costs = Revenue
D. Number of Sales - Total Costs = Revenue
_____ 21. Which of the following is NOT fixed costs?
A. Wages
C. Manager's Salary
B. Rent
D. Insurance
_____ 22. What does 'total cost' mean?
A. The total income earned by a firm
B. The total expenses of a firm
C. The total amount of profit earned by a firm
D. None of the above
_____ 23. What does the amount of revenue a business earns each month depend on?
A. Selling price
B. Quantity sold
C. Both selling price and quantity sold
D. Quality of product
_____ 24. What is revenue sometimes called?
A. Turnover
B. Overheads
C. Price
_____ 25. An increase in output does NOT mean an increase in:
A. variable costs
B. overheads
C. direct costs
D. Cost
D. fixed costs
_____ 26. A firm sells 10 units at P5 each. Its total costs are P30. How much profit is made?
A. A P50 profit is made
C. A P20 loss is made
B. A P20 profit is made
D. A P50 loss is made
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_____ 27. How do you calculate profit?
A. Subtracting total costs from total revenue
B. Subtracting total revenue from total costs
C. Multiplying the quantity sold by price
D. None of the above
_____ 28. How do you calculate total revenue?
A. Quantity sold x average price
B. Quantity sold x average cost
C. Quantity sold x average profit
D. None of the above
_____ 29. When is a business making a loss?
A. When revenues are higher than costs
B. When revenues equal costs
C. When revenues are less than costs
D. None of the above
_____ 30. When is a business making a profit?
A. When revenues are higher than costs
B. When revenues equal costs
C. When revenues are less than costs
D. None of the above
_____ 31. If a company reduces a product's price, what does this mean for their revenue?
A. There will be an increase in revenue
B. There could be an increase or decrease in revenue
C. There will be an decrease in revenue
D. None of the above
_____ 32. What does break even point show?
A. where a business is neither making a profit or loss
B. how many items to make
C. how much profit they're making
D. where a business has more fixed costs than variable
_____ 33. What is the formula for contribution?
A. cost price - selling price
B. selling price - variable cost
C. fixed costs - variable costs
D. selling price - cost price
_____ 34. What is one limitation to calculating break even?
A. helps projected sales
C. based on estimates
B. based on multiple products
D. considers stock wastage
_____ 35. My total costs are P50,000 when selling 100 items. My fixed costs are P20,000.
What must be the variable cost of one item?
A. 100
B. 200
C. 300
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D. 500
_____ 36. Some business costs are classified as fixed costs because they
A. must be paid within a set time
B. don't change when sales go up or down
C. are unpredictable and must be estimated
D. cost all businesses the same amount
_____ 37. Which one of the following would be included in the calculation of total costs?
A. Selling price
C. Rent of premises
B. Revenue
D. Refund to a customer
_____ 38. Gemima's dolls houses are very popular, she is considering setting her selling price
to P55. If she does this what would happen to her break-even point?
A. Would increase
C. Would decrease
B. Would stay the same
D. None of the options
_____ 39. Businesses calculate break-even in units so they know
A. how much profit they will earn after they break even
B. which products they should purchase for resale
C. which costs are variable and which are fixed
D. how many products they must sell to break even
_____ 40. If a business's sales double, its variable costs will also likely
A. Remain the same
C. double
B. Decrease
D. increase
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Name: __________________________________________________ Date: _____________
Grade-Section: ___________________________________________ Score: ____________
Quarter4-ENTREPRENEURSHIP
Worksheet No. 4
Title of the Activity #2: UNDERLINE ME
Most Essential Learning Competency: Demonstrate understanding of the 4Ms of
operations
K to 12 BEC CG: TLE_ICTAN11/12EM-Ia-2
Directions: Underline the appropriate word inside the parenthesis to make
each statement correct.
1. Costs which do not vary with the level of output are called (fixed, variable) costs.
2. Wages, direct materials, and direct labor are (fixed, variable) costs
3. Revenue forecasting helps you budget business (expenses, profit) early because you have a
better idea of the total amount of money you have to budget each month.
4. Forecasting will also help you time important moves—like bringing in a new hire,
launching a new marketing campaign, or cutting costs during slow seasons—to match your
predicted (sales, revenue) throughout the year.
5. A detailed, well-researched forecast can even help convince lenders or investors to
contribute (funds, insurance) to your business.
6. Judgment forecasting involves using your intuition and experience as the business owner to
set a general pattern for your expectation of the year’s income and (expenses, costs).
7. If you’ve been in business for a little while, start with (last, current) year’s revenue
statements as a basis for predicting what will happen in coming year.
8. As you calculate anticipated (cost, revenue), separate individual income sources, such as
online vs. retail sales or sales from different major product lines, to get a clear picture of
potential ups and downs from each revenue stream.
9. Ideally, keep your revenue forecast up-to-date by inputting (data, changes) once per
month, or at minimum once per quarter.
10. While no revenue forecast will ever be 100% accurate down to the penny, it will provide
you with a very educated guess for your upcoming financial (needs, crisis).
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Name: __________________________________________________ Date: _____________
Grade-Section: ___________________________________________ Score: ____________
Quarter4-ENTREPRENEURSHIP
Worksheet No. 4
Title of the Activity #3: YOUR OPINION MATTERS
Most Essential Learning Competency: Demonstrate understanding of the 4Ms of
operations
K to 12 BEC CG: TLE_ICTAN11/12EM-Ia-2
Directions: Answer each question briefly but substantially. Refer to the
scoring rubric below on how you will be rated.
SCORING RUBRIC
Point(s)
5
4
3
2
1
Description
Excellent expression of ideas and very easy to understand
Very good expression of ideas and easy to understand
Good expression of ideas and quite easy/difficult to understand
Fair expression of ideas and difficult to understand
Poor expression of ideas and very difficult to understand
1. How do you forecast revenue?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
2. Why is revenue forecasting important?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
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ANSWER KEY:
Activity #1.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
C
C
C
C
A
C
A
D
C
C
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
A
D
D
D
C
A
C
C
C
B
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
A
B
C
A
B
B
B
A
C
A
Activity #2.
1.
2.
3.
4.
5.
Fixed
Variable
Expenses
Revenue
funds
6.
7.
8.
9.
10.
Activity #3.
Answers may vary
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Expenses
Last
Revenue
Changes
Needs
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
B
A
B
C
C
B
C
C
D
D