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Table 3.9.2 shows the format of a typical budget for a business for a single month.
Table 3.9.2 The format of a budget
Budgeted figures $m
Income
Sales revenue 27.2
Other income 3.4 Top tip!
Total income 30.6
Any budgets you may encounter
Expenses in your examinations will be in
Materials and components 8.8 the format shown in Table 3.9.2.
Marketing 2.5 They are likely to cover a period
Heating and lighting 3.6 of several months. Make sure that
Rent 5.0
you are familiar with this format.
Other expenses 1.9
We’ll see later in the section on
Wages and salaries 6.6
Total expenses 28.4
variances (page 367), that budgets
can contain actual figures as well
Net income (or profit) 2.2 as budgeted (or forecast) ones.

CASE STUDY

Hotels in Singapore
Hotels in Singapore used to enjoy one of the highest
rates of occupancy in the world. Data from the Singapore
Tourism Board showed that 93.8 per cent of its hotel
rooms were occupied in July 2019. In contrast the average
hotel occupancy rate for July 2020 was 70.0 per cent, up
from 53.3 per cent in June. Large hotels, having at least
Questions
300 rooms, benefited from the highest occupancy rates
in July 2020, reaching a figure of 83.3 per cent.
room was (Singapore) $56.9, 72.1 per cent lower than
one year previously.
The current position (principally due to the effects of
Covid-19) in the Singapore hotel market has made
it very difficult for managers of hotels to construct
budgets for their businesses.
1 Define the term budgets. [2]

At the same time, the prices Singapore’s hotels are able 2 Explain two reasons why it might be difficult for
to charge for accommodation have fallen sharply. In July the managers of hotels in Singapore to construct
2020 the average daily revenue received from renting a accurate income budgets. [4]

There is the risk, of course, that the information in budgets may not prove to be accurate. For
example, sales revenue budgets may be incorrect if there is an unexpected slump in sales due to, say,
a change in consumers’ tastes and fashions or the entry of a new competitor into a specific market.

The budget setting process

Before firms can start to write their budgets for the coming year, they need to carry out some
research. This may involve:
analysing the market to predict likely trends in sales and prices to help plan and forecast the
income from sales and any other activities
analysing likely actions and reactions of competitors in the market and how this might affect
future income

366 Business Management for the IB Diploma