Entrepreneurship Quarter 2 –

Module 7 Forecasting
Revenues And Costs
Lesson 1 – Forecasting the revenues of the
business
At the end of the lesson, learners should be
able to:
•a. Define projected revenue and costs.
•b. identify the difference of daily,
monthly and yearly projected revenue
and costs.
•c. Create a table showing projected
revenue and costs.
PRE TEST
• Direction: Choose the letter that bests
correspond to your answer.

1. Refers to the amount added to the cost of a

product to determine the selling price –
a. Revenue c. Mark Up
b. b. Cost d. Mark Down
• 2. Aling Marta sells bibingka in her
neighbourhood, every day she can sell 45
pieces of bibingka at 20 pesos each. How
much is her daily revenue?
a. 900.00 c. 800.00
b. 450.00 d. 1000.00
•3. It is a planning tool that helps
entrepreneur copes up with
uncertainties in the future operation of
the business.
a. Revenue c. Benchmarking
b.b. Selling d. Forecasting
•4. The selling price of an item or
merchandise is computed by adding cost
per unit and __________?
a. Revenue c. Discount
b. Mark Up d. Number of Items
•5.It is the result when sales exceed
the cost to produce goods or render
services –
a. Forecasting c. Revenue
b. b. Selling d. Benchmarking
ANSWER KEY:
• 1. C
• 2. A
• 3. D
• 4. B
• 5. C
• You might probably be wondering how profits
are computed. This module will help guide you
realize the revenues and profits of your chosen
business.
• Revenue is a result when sales exceed the cost
to produce goods or render the services.
• Cost on the other hand simply refers to the
amount of money used to produce or
manufacture goods/merchandise as well as costs
incured in selling the goods/merchandise.
Forecasting
• Forecasting is a tool used in planning that aims to support
management or a business owner in its desire to adjust and cope up
with uncertainties of the future.
• Forecasting depend on data from the past and present and make
meaningful estimates on revenues and costs.
• Entrepreneurs use forecasting techniques to determine events that
might affect the operation of the business such as sales expectations,
costs incurred in the business as well as the profit that the business is
earning. Making informed estimates reduces risks that might be
experienced by the entrepreneur in the future.
• The entrepreneur after realizing the
potential for profit of his/her business
concept, the next step is to estimate how
much the revenue is on daily, monthly and
annual basis. Before going to forecasting
and projecting the revenues of the business,
let us determine first what revenue is.
Revenue
• Revenue is a result when sales exceed the cost
to produce goods or render the services.
Revenue is recognized when earned, whether
paid in cash or charged to the account of the
customer. Other terms related to revenue
includes Sales and Service Income. Sales is used
especially when the nature of business is
merchandising or retail, while Service Income is
used to record revenues earned by rendering
services.
• The entrepreneur would want his/her
forecasting for his/her small business as credible
and as accurate as possible to avoid
complications in the future. In estimating
potential revenue for the business, factors such
as external and internal factors that can affect
the business must be considered. These factors
should serve as basis in forecasting revenues of
the business. These factors are:
1. The economic condition of the country.
• When the economy grows, its growth is
experienced by the consumers. Consumers are
more likely to buy products and services. The
entrepreneur must be able to identify the overall
health of the economy in order to make
informed estimates. A healthy economy makes
good business.
2. The competing businesses or competitors.
• Observe how your competitors are doing business. Since you
share the same market with them, information about the
number of products sold daily or the number of items they
are carrying will give you idea as to how much your
competitors are selling. This will give you a benchmark on
how much products you need to stock your business in order
to cope up with the customer demand. This will also give you
a better estimate as to how much market share is available
for you to exploit.
3. Changes happening in the community
• Changes happening in the community. Changes’ happening
in the environment such as customer demographic, lifestyle
and buying behaviour gives the entrepreneur a better
perspective about the market. The entrepreneur should
always be keen in adapting to these changes in order to
sustain the business. For example, teens usually follow
popular celebrities especially in their fashion trend. Being
able to anticipate these changes allows the entrepreneur to
maximize sales potential.
4. The internal aspect of the business.
• The internal aspect of the business. Another factor that
affects forecasting revenues in the business itself. Plant
capacity often plays a very important role in forecasting. For
example, a “Puto” maker can only make 250 pieces of puto
every day; therefore he/she can only sell as much as 250
pieces of puto every day. The number of products
manufactured and made depends on the capacity of the
plant, availability of raw materials and labour and also the
number of salespersons determines the amount of revenues
earned by an entrepreneur.
Example:
• Ms. Fashion Nista recently opened her dream business and named Fit
Mo’to Ready to Wear Online Selling Business, an online selling
business which specializes in ready to wear clothes for teens and
young adults. Based on her initial interview among several online
selling businesses, the average number of t-shirts sold every day is 10
and the average pair of fashion jeans sold every day is 6. From the
information gathered, Ms. Nista projected the revenue of her it Fit
Mo’to Ready to Wear Online Selling Business.
• She gets her supplies at a local RTW dealer in the city. The cost per
piece of t-shirt is 90 pesos, while a pair of fashion jeans costs 230
pesos per piece. She then adds a 50 percent mark up to every piece
of RTW sold.
Mark up refers to the amount added to the cost to come
up with the selling price. The formula for getting the
mark up price is as follows:
• Mark Up Price = ( Cost x desired mark up percentage)
• Mark Up for T-shirt = ( 90.00 x .50) Mark Up for T-shirt = 45.00

• In calculating for the selling price, the formula is as follows:

• Selling Price = Cost + Mark Up
• Selling Price = 90.00 + 45.00
• Selling Price for T-shirt = 135.00
Table 1 shows the daily projected revenue of Ms. Nista’s online selling
business. Computations regarding the projected revenue is presented in
letters in upper case A, B, C, D, and E.
Table 1 shows the daily projected revenue of Ms. Nista’s online selling
business. Computations regarding the projected revenue is presented in
letters in upper case A, B, C, D, and E.
• Example, in table 1 the daily revenue is 3,420.00. To get the
monthly projected revenue it is multiplied by 30 days.
Therefore,
• Projected Monthly Revenue = Projected daily revenue x 30 days
• Projected Monthly Revenue = 3,420.00 x 30
• Projected Monthly Revenue = 102,600.00
• On the other hand, the projected yearly revenue is computed by
multiplying the monthly revenue by 12 months. The calculation for
projected yearly revenue is as follows.
• Projected Yearly Revenue = Projected daily revenue x 365 days
• Projected Yearly Revenue = 3,420.00 x 365
• Projected Yearly Revenue = 1,248,300.00
• Table 2 shows the projected monthly and
yearly revenue of Ms. Nista’s online selling
business. Computations about the monthly
revenue is calculated by multiplying daily
revenues by 30 days ( 1 month).
 REVENUE REVENUE
MONTH MONTH
ASSUMPTIONS ASSUMPTIONS

JAN START OF VENTURE JULY INCREASE 5%

SAME REVENUE TO
FEB INCREASE 5% AUG JULY

MAR INCREASE 5% SEPT DECREASE 5%

APR INCREASE 5% DECREASE 5%

OCT

MAY INCREASE 5% INCREASE 5%

NOV

JUN INCREASE 10% DEC INCREASE 10%

Activity no. 1
• Aling Minda is operating a buy and sell business, she sells broomsticks
(walis tingting) in her stall at a local market. She gets her broomsticks
from a local supplier for 25 pesos each. She then adds 50 percent
mark-up on each broomstick. Every day, aling Minda can sell 30
broomsticks a day. Use the template below and fill in the necessary
figures based on the scenario. Remember to use the factors to
consider in projecting revenues and refer to tables 1, 2 and 3 as your
guide.
• Use the calculations you have made in Table 1 to successfully
complete the information in Tables 2 and 3 and calculate the
projected monthly and yearly revenue of Aling Minda’s business.
• For Table 3, use the following assumed increases in
sales every month. February to May, 5 percent
increase from previous sales. For the month of June,
10 percent increase from previous sales. For the
months July to December, record the same sales
every month.
Forecasting the Costs to be
Incurred
Lesson 2
Breakdown on Daily Allowance
• Name: ______________________
• Daily Allowance: Ᵽ __________
• Less: Daily Expenses
• Food Ᵽ_________
• Fare _________
• School Supplies _________
• Recreation _________
• Others _________ ___________ Total Ᵽ ___________
Let us identify costs and
expenses incurred by the
business.
•Incurred- Incurred is an accounting term
that means that all transactions,
regardless of their nature, must be
recorded when they occur.
Operating Expenses
• the business also incurs costs in its operation, these
costs are called Operating Expenses. Operating
expenses such as payment on Internet connection,
Utilities expense (i.e.Electricity), Salaries and Wages
and Miscellaneous are essential in the operation of
the business; this allows the business to continue
operate in a given period of time.
Cost of Goods Sold / Cost of Sales
• refer to the amount of merchandise or
goods sold by the business for a given
period of time. This is computed by adding
the beginning inventory to the Net Amount
of Purchases to arrive with Cost of goods
available for sale from which the
Merchandise Inventory end is subtracted.
Merchandise Inventory,
beginning
•Merchandise Inventory,
beginning refers to goods and
merchandise at the beginning of
operation of business or
accounting period.
Merchandise Inventory, end
•Merchandise Inventory, end
refers to goods and
merchandise left at the end
of operation or accounting
period.
Purchases
•Purchases refer to the merchandise
or goods purchased.
•Example: Cost to buy each pair of
Jeans or t-shirt from a supplier.
Freight-in
•Freight-in refers to amount paid to
transport goods or merchandise
purchased from the supplier to the
buyer. In this case, it is the buyer
who shoulders this costs.
Table 5 shows how freight-in is calculated.
• It is assumed that at an average, Ms. Nista pays
at least 250.00 pesos for every 12 items
delivered successfully by her supplier through a
courier service. Since her average order is 480
pieces every month, she pays: 480 pcs. / 12 pcs.
= 40 x 250.00 = 10,000.00
• Now that the cost of goods sold is now
calculated, let us now identify expenses that the
business incurs in its operation. Operating
expenses such as Internet connection, Utilities
like electricity and miscellaneous expense are
important to keep the business running. These
expenses are part of the total costs incurred by
the business in its day-to-day operation and are
paid every end of the month.
The operating expenses and assumed amount
are presented below:
The projected monthly costs covering the first of operation of Ms.
Nista’s Fit Mo’to RTW Online Selling Business is presented in
Table 6.
• Mang Eduard operates a buy and sell business. He
sells umbrellas in his shop near the city mall. He gets
his umbrellas from a local dealer. Each umbrella costs
90.00 pesos each. Expecting rainy season to come,
Mang Eduard purchased 4 dozens of umbrellas every
week. The supplier then charges 200.00 pesos per
dozen for freight. Mang Eduard can sell 12 umbrellas
every day. Remember to use the factors to consider in
projecting revenues and refer to tables 4, 5 and 6 as
your guide. Suppose Mang Eduard purchases and
sales is the same every month, fill in the necessary
information in table 6.
 ADDITIONAL ACTIVITIES
• Nanay Marta is operating a small Bussiness, she sells Puto in
her stall at a local market. She gets her Puto from a local
supplier for 5 pesos each. She then adds 50 percent mark-up
on each puto. Every day, Nanay Marta can sell 200 pcs Puto
a day. Use the template below and fill in the necessary
figures based on the scenario. Remember to use the factors
to consider in projecting revenues and refer to tables 1, 2
and 3 as your guide.
• For Table 3, use the following assumed increases in sales
every month. February to May, 5 percent increase from
previous sales. For the month of June, 10 percent increase
from previous sales. For the months July to December,
record the same sales every month.