Business Budget Starting your own business can be exciting and daunting at the same time.
Businesses use math when managing finances, determining production levels, designing products
and packaging, and monitoring labor. A bakery can be a highly profitable and rewarding
business. During this activity, you will apply the skills from Ch. 1 & 2 to navigate some of the
issues facing bakery owners. Initial Budget: $75,000 Loan from Family, $37,250 small business
loan from bank. All loans to be repaid in 10 yrs Application Practice Answer the following
questions. Use Equation Editor when writing mathematical expressions or equations. Show all of
your work! First, save this file to your hard drive by selecting Save As from the File menu. Click
the white space below each question to maintain proper formatting.
1. You have recently found a location for your bakery and have begun implementing the first
phases of your business plan. Your budget consists of a $75,000 loan from your family and a
$37,250 small business loan. These loans must be repaid in full within 10 years.
a) What integer would represent your total budget?
75000+37250 = 112250
So the total budget is represented by $112,250.00.
b) Twenty-five percent of your budget will be used to rent business space and pay for utilities.
Write an algebraic expression that indicates how much money will be spent on business space
and utilities. Do not solve.
y=.25x
Where y= the amount of money spent on business space and utilities and x = total budget.
c) How much money will rent and utilities cost? Explain how you arrived at this answer.
To solve we simply substitute the total budget into the equation in b) and solve for y:
Y=.25(112250)=28062.50
So the rent and utilities will cost $28,062.50
d) Suppose an investor invests $25,000 in exchange for part ownership of your business. Will the
investor contribute enough money to meet the cost of rent and utilities? Support your answer,
and write an equation or inequality that illustrates your answer.
The investor will not contribute enough money since 25,000 < 28,062.50. In other words, we
know that rent and utilities cost 28,062.50 and the investor only puts in 25,000. Because 25,000
is less than the cost of rent and utilities, it will not cover the rent and utilities expenses.
e) The following equation illustrates your remaining funds after paying for rent and utilities.
How much money is left? Explain how you arrived at your answer. $37,250 + $75,000+ $25,000
– 0.25($75,000 + $37,250) =
. $37,250 + $75,000+ $25,000 – 0.25($75,000 + $37,250) = 137250-28062.50=$109,187.50.
All we had to do was first multiply .25 by the sum of 75000 and 37250 (the cost of the rent and
utilities) and subtract this from the total budget which is the sum of 37250+75000+25000.
The money left over is =$109,187.50
2. You are trying to decide how to most efficiently use your oven. You do not want the oven
running at a high temperature when it is not baking, but you also do not want to waste a lot of
time waiting for the oven to reach the desired baking temperature. The instruction manual on the
industrial oven suggests your oven temperature will increase by 32 degrees Fahrenheit per
minute. When the oven is initially turned on, the temperature is 70 degrees Fahrenheit. Write an
expression for the temperature of the oven after being on for x minutes.
T = 32m + 70
Where T=the temperature after m minutes.
What will the temperature of the oven be after 9 minutes? Explain how you arrived at your
answer.
To find the answer, we simply substitute 9 in for m in the equation above and solve for T:
T= 32(9)+70 = 358.
So after 9 minutes, the temperature will be 358 degrees F.
3. In your industrial oven, you bake two baking sheets with 13 scones each, two baking sheets
with 18 cookies each, and one baking sheet with 3 scones and 12 cookies.
a) Write an expression that illustrates the total cost of all baked goods in the scenario above
using the variable s to represent the cost of scones and the variable c to represent the cost of
cookies. Simplify your expression by combining like terms.
T=2(13s)+2(18c)+1(3s+12c) =
T=6s+36c+3s+12c=
T=9s+48c
Where T= the total cost.
b) Suppose you have decided to price the scones at $2.19 each and the cookies at $1.28 each.
How much total revenue would result from selling all the scones and cookies baked in the oven
at one time?
To solve this will simply substitute 2.19 in for s and 1.28 in for c in the equation above and solve
for T:
T=9(s)+48(c)=9(2.19)+48(1.28)=19.71+61.44=81.15
So the total revenue would be $81.15.
c) Yesterday your store earned $821.76 just from the sale of cookies. Write and solve an
equation that represents how many cookies were sold.
Number of Cookies sold = 821.76/cost per cookie = 821.76/1.28=642.
So, 642 cookies were sold.
4. Your profit P is determined by subtracting the cost C (the amount of money it costs to operate
a business) from the revenue R (the amount of money you earn from selling your product). Profit
can be represented algebraically by the equations: Profit=Revenue-Cost OR P = R - C
a) Rewrite the formula to solve for C.
C=R-P
b) Suppose your profit for one day is $1,354, and the cost of running the business for the day is
$1,543. What is the revenue for that day? Explain your answer.
We know that R=C+P by solving for R. So now we just substitute 1354 in for P and 1543 in for
C and solve for R
R=1354+1543=2897
So the total revenue is $2,897.00.
5. When managing a business, it is important to take inventory of where your money is spent.
You have a monthly budget of $7,500. Refer to the table below and answer the questions that
follow. Round your answers to the nearest tenth of a percent.
Category
Labor
Materials
Rent/Utitlies
Miscellaneous
Total
Cost
$2,685
Percentage
21%
25%
$1,365
$7,500
a) What percentage of the total monthly budget is spent on labor?
This is found by dividing 2,685 by 7,500:
Total Labor Cost=2685/7500*100=35.8%
So the 35.8% of the total monthly budget is spent on Labor.
100%
b) What percentage of the total monthly budget is spent on miscellaneous items?
Miscellaneous=1365/7500*100=18.2%
c) How much do materials cost monthly?
Materials Cost = .21*7500=1575.
So materials cost $1,575.00 monthly.
d) How much do rent and utilities cost monthly?
Rent/Utilities = .25*7500=1875.
So Rent/Utilities cost $1,875.00 monthly.