Reference no: EM132915322

Kayleigh, a second-year business owner, has learned a bit about budgeting but needs some more insight. At the start of the year, she made a budget for selling 2,000 umbrellas, her main product. Kayleigh's prices vary based on the weather (she increases prices on rainy days and offers discounts on sunny days), but she budgeted at an average sale price of $8 per umbrella. It is now near the end of the year and Kayleigh expects the final sales number to total 2,200 umbrellas at a price of $7 each. She suspects that her variable expenses for umbrella purchase, design additions, and marketing, budgeted at a total of $10,000, are over by 10%. However, she considers the increased costs to be direct results of higher sales volume which is a good thing. Kayleigh believes she fixed costs for her store have remained on budget. She decided not to track fixed costs for umbrellas since she does not know if things like employee salary, store rent, etcetera can be allocated accurately.

Problem 1: Give Kayleigh some advice on budgeting, including discussion of how flexible and static budgets can impact her specific situation. Also, analyze her business situation and make recommendations.