Forecasts & Budgets
Build a forecast from drivers, compare to budget, and don't mistake a run rate for a forecast.
Pen and paper is fine · no calculator needed why?
Opens at level 30.
Lesson and untimed practice
Read the full lesson and try each skill without a clock. About 3 minutes to read.
skills · practice stats
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Driver-based revenue not tried yet
worked example
Forecast 69 full-month customers at $300 each. What is forecast recurring revenue?
Answer: $20,700.00
- Revenue = customers × price = 69 × $300 = $20,700.
- Building the forecast from drivers makes it checkable.
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Budget versus actual not tried yet
worked example
Budgeted wages are $26,100 and actual wages are $28,700. What is the variance, calculated as actual minus budget? (Use a minus sign if negative.)
Answer: $2,600.00
- $28,700 − $26,100 = $2,600.
- Whether that's good depends on the line: spending above budget is unfavorable.
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Favorable or unfavorable? not tried yet
worked example
Actual supplies expense is $1,100 below budget. Is that variance favorable or unfavorable?
- Favorable — spending came in lower than planned
- Unfavorable — the budget wasn't fully used
- Neither — expenses can't have variances
- Unfavorable — the variance is a negative number
Answer: Favorable — spending came in lower than planned
- For a cost, coming in below budget is favorable: less spending than planned.
- The sign of actual minus budget isn't the verdict: for costs, above budget is unfavorable; for revenue, above budget is favorable. Then ask why it happened.
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Run rate or seasonal forecast? not tried yet
worked example
Last September's revenue was $46,000 and the business is growing about 15% a year. What is a seasonal forecast for this September?
Answer: $52,900.00
- Compare like with like: last September × 1.15 = $46,000 × 1.15 = $52,900.
- Multiplying one month by 12 would give a run rate, which ignores seasons, one-off jobs, and changes in customers.
rest ladder
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- mastered · every 90 days