Entrep12 - Q2 - M7 - Forecasting Revenues and Costs

Quarter 2 — Module 7
CO_Q2_Entrepreneurship SHS 1
Module 7
Entrepreneurship – Grade 12
Alternative Delivery Mode
Quarter 2 - Module 7
Second Edition, 2021
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2 CO_Q2_Entrepreneurship SHS
Module 7
Entrepreneurship
Quarter 2 – Module 7
Forecasting Revenues
and Costs Department
Module 7
Introductory Message
For the Learner

Have you ever dreamed of becoming the next multi-millionaire? If you’re thinking that winning the
lottery is the only way to become one, well, think again. It is not chance that gives you millions, instead
being a millionaire is a result of hard work and determination. Starting your own business is a good
beginning towards fulfilling your dreams. Entrepreneurship is the way!
You may often hear the word entrepreneur and entrepreneurship. But what do these terms mean?
You may refer to an entrepreneur as the person managing the business and entrepreneurship as the
business venture. Some may say there is no difference.
So, what does this module provide you towards reaching your dreams?
1. It outlines the concepts and basic principles, and processes of developing a business plan.
2. It helps you understand the environment and market in your locality as a factor in
developing a business concept.
3. It allows you to experience starting and operating your own business.
Substantial knowledge of entrepreneurial principles and processes is important as this increases the
chances of making your business successful.
In this module, you are guided with a set of learning parts that will help you understand the underlying
principles of entrepreneurship.
1. What I Need to Do – the part used to introduce the learning objectives in this module.
2. What I Know – this is an assessment as to your level of knowledge to the subject matter at
hand, meant specifically to gauge previous knowledge.
3. What’s In – the part used to connect your previous learning with the new lesson.
4. What’s New – the part used to introduce new lesson through a story, an activity, a poem,
song, situation or activity.
5. What is It – the part that will help you discover and understand entrepreneurial
concepts.
6. What’s More – the part that will help enrich your learnings of entrepreneurial concepts.
7. What I Have Learned – the part that will help you process what you have learned In the
lesson.
8. What I Can Do – the part that allows you to apply what you have learned into real life
situations.
9. Assessment – the part that evaluates your level of mastery in achieving the
learning objectives.
10. Additional Activities – the part that enhances your learning and improves your
mastery of the lesson.
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What I Need to Know
Now that you have identified what business to undertake and are familiar
with the tools and materials needed in the operation of your business, let us apply
what you have learned in the previous module by forecasting the revenues and
costs incurred in your business. 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. How much revenues and costs incurred in the
operation of the business, how are these projected, and how are these used to
compute profit/loss of the business shall be learned in this module.
This module is divided into two lessons:
Lesson 1 – Forecasting the revenues of the business
Lesson 2 – Forecasting the costs to be incurred
To be able to successfully complete this module, previous knowledge in

multiplying numbers will best help.
Why forecast? We often watch news as Kuya Kim reports the direction of
the typhoon in the next 2 days, what Kuya Kim is doing is giving us information
taken by satellites and gives us the direction of the typhoon. In weather
forecasting, the reporter is giving us advance information that could help us
prepare and be ready for upcoming typhoon. This way, risks such as accidents,
devastation of properties and loss of life may be prevented.
Forecasting is a tool used in planning that aims to support management or

a business owner in its desire to adjust and cope with uncertainties of the future.
Forecasting depends on data from the past and present and to make meaningful
estimates on revenues and costs. Forecasting revenues and costs is the same
as weather forecasting, though forecasting revenues and costs is in the context
of business. Entrepreneurs use forecasting techniques to determine events that
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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.
In this module, you will be making informed estimates about revenues and
calculate estimates involving costs incurred by the business. Factors affecting
forecasting will be discussed to better help you in making projections.
After carefully studying the contents of this module, you should be able to:
 identify essential factors in forecasting revenues and costs;

 calculate mark-up and selling price of a product or merchandise;
 compute projected revenues;
 compute projected costs; and
 create a table showing projected revenue and costs.
 appreciate the significance of forecasting revenues an costs to a business
What I Know
Before starting with this module, let us see what you already know about
forecasting revenues and costs. Answer the questions below.
Encircle the letter that bests correspond to your answer.
1. This refers to the amount added to the cost of a product to determine the selling
price.
a. Revenue b. Cost c. Mark Up 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 b. 450.00 c. 800.00 d. 1000.00
3. It is a planning tool that helps the entrepreneur copes with uncertainties in the
future operation of the business.
a. Revenue b. Selling c. Benchmarking d. Forecasting
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4. The selling price of an item or merchandise is computed by adding cost per unit
and __________?
a. revenue b. mark up c. discount d. number of Items
5. Mang Berting is a fruit vendor selling at the local public market. He gets his
mangoes from a supplier at 25 pesos per kilo and sells it at 45 pesos per kilo to
his customers. How much mark-up is Mang Berting adding to his selling price?
a. 25.00 b. 30.00 c. 15.00 d. 20.00
6. Aling Elvie sells t-shirt at 175.00 pesos each. If each t-shirt costs 135.00 pesos,
how much is the mark-up?
a. 30.00 b. 45.00 c. 40.00 d. 50.00
7. It is the result when sales exceed the cost to produce goods or render services.
a. Forecasting b. Selling c. Revenue d. Benchmarking
8. It is a tool that allows managers to make educated estimates on revenue and
costs of the business in order to cope with uncertainties of the future.
a. Estimating b. Guessing c. Forecasting d. Benchmarking
9. This refers to goods and merchandise at the beginning of operation of business
or accounting period.
a. Merchandise Inventory, end c. Expenses
b. Merchandise Inventory, beginning d. Freight-in
10. Mang Lito sold 5 pairs of slippers. Suppose Mang Lito purchased the 5 pairs of
slippers at P 30.00 each and pays P120.00 freight. Calculate how much is the
cost of goods sold?
a. 220.00 b. 420.00 c. 270.00 d. 200.00
11. This refers to amount paid to transport goods or merchandise purchased from the
supplier to the buyer.
a. Merchandise Inventory, end c. Expenses
b. Merchandise Inventory, beginning d. Freight-in
12. This refers to costs incurred through payment of utilities such as electricity and
water.
a. Revenue c. Mark-up
b. Operating expenses d. Free
13. Merchandise or goods purchased are referred to as –
a. Purchases c. Costs
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b. Operating Expenses d. Loss
14. It is the result when cost to produce goods or render services is greater than the
sales.
a. Selling b. Revenue c. Benchmarking d. Loss
15. Jean purchased 5 baskets for P 30.00 each. According to her calculation, P 10.00
shall be added to the cost as mark-up. How much is the selling price of each
basket?
a. 35.00 b. 40.00 c. 50.00 d. 60.00
How was the pre-test? If your answers are all correct, well very good!
This only shows that you already know about the topic. Please continue to study
to know more about the topic.
If your score are low, this means that this module is for you. Studying
this module will help you understand the concept of forecasting and how this
lesson applies to your daily life. Continue studying this module to know the
answers to all the questions and a lot more.
You may now start learning!
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Forecasting The Revenues
Lesson
Of The Business
1
What’s In
You have learned in the previous lesson the 4Ms of operations; you now
have the idea on what product/s to manufacture and sell. Now, you also have a
business model. One of the most challenging parts in developing a business plan
is the financial plan. This part allows the entrepreneur to make decisions based
on financial assumptions without even having started the business. Therefore,
these financial projections should be given the most attention by the
entrepreneur.
Let us now examine how the sale of products generates revenues. In

this lesson, we will identify the mark-up and selling price of the product. We will
also project the revenues that the business will make from the sale of products
What’s New
Have you tried estimating the time that it takes you to travel from home
to school? Try to fill in the necessary information in the table below. Write your
estimate in Estimated Time column, after arriving to school fill in the Actual Time
in the blank provided.
Estimated Time Actual Time
1. ____________ __________
2. ____________ __________
3. ____________ __________
How close were your estimates compared to the actual time? Did your
estimate fall short compared to the actual time? What do you think were the
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factors that might have contributed in getting you early to school? List the reasons
in the blank.
_______________________________________________________________
_______________________________________________________________
On the other hand, does your actual time exceed your estimates? What
do you think were the factors that might have contributed in arriving later than
your estimated time? List the reasons in the blank.
What is It
Making informed estimates requires careful considerations on several
factors that might affect the outcome of your travel such as, distance from home
to school, the means of transportation you will be taking, the number of
passengers and etc. Traveling from home to school on a regular basis had helped
you arrive with an estimate that was very close to the actual time of arrival.
Considering these factors is essential in making informed estimates by

the entrepreneur. Since the business he/she is venturing hasn’t started yet, it is
important that these factors affecting forecasting will be determined to better help
him/her in making the best decisions for the business.
For 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 a
daily, monthly and annual basis. Before going to forecasting and projecting the
revenues of the business, let us determine first what revenue is.
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 include
Sales and Service Income. Sales is used especially when the nature of business
is merchandising or retailing, while Service Income is used to record revenues
earned by rendering services.
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Now that you know about revenue, Let us determine the factors to
consider in forecasting revenues.
You have just learned about what revenue is. This time, let us study the
various factors to consider in forecasting revenues.
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 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 environment
such as customer demographic, lifestyle and buying behavior give 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. 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 can only sell as much as 250 pieces of puto every day. The
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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 determine the amount of revenues earned by an entrepreneur.
Now that all factors affecting forecasting revenues are identified, you
can now calculate and project potential revenues of your chosen business. The
table below shows an example of revenues forecasted in a Ready to Wear Online
Selling Business.
Example: Ms. Fashion Nista recently opened her dream business and
named it 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 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 projected daily 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.
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Table 1
Projected Daily Revenue
Fit Mo'to Ready to Wear Online Selling Business
Projected
Volume Projected
Cost per Mark-up Selling (D) Revenue
Type of Unit 50% Price Average (E)
RTW's (A) (B) (C) No. of
Items Sold
(Daily)
(Daily)
(A) (B)= (A x .50) (C)= (A+B) (D) (E) =(C x D)
T-Shirts 90.00 45.00 135.00 10 1,350.00
Jeans 230.00 115.00 345.00 6 2,070.00
Total 320.00 160.00 480.00 16 3,420.00
Table 2 shows the projected monthly and yearly revenue of Ms. Nista’s online
selling business. Computations about the monthly revenue is calculated by
multipying daily revenues by 30 days ( 1 month).
For 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
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Table 2
Projected Monthly and Yearly Revenue
Projected Projected
Volume Projected Volume Projected
Selling Average Revenue Average No. Revenue
Type of Price No. of Items of Items
RTW's Sold Sold
(Monthly) (Yearly)
(Monthly) (Yearly)
F= (D x 30 H= (D x 365
(C)= (A+B) G= (C x F) I= (C x H)
days) days)
T-Shirts 135.00 300 40,500.00 3,650 492,750.00
Jeans 345.00 180 62,100.00 2,190 755,550.00
Total 480.00 480 102,600.00 5,840 1,248,300.00

Table 3 shows the projected monthly revenues covering one year of
operation. The table shows an average increase of revenue every month by 5
percent except June, July to October and December. While the month of June
has twice the increase from the previous month by 10 percent, let us consider
that months covering July to October are considered to be Off-Peak months,
therefore sales from July to October are expected to decrease. It is assumed that
there is no increase in revenue from July to August, while from August to October
the decrease in revenues is 5 percent from previous month. Since revenues from
sales of RTW’s are considered to be seasonal, it assumed that there is a 10
percent increase in revenue from November to December.
Computation for assumed increase of reveneue on specific months is as

follows:
Projected Monthly Revenue (Increase) = Revenue (January) x 5 %

Increase
Projected Monthly Revenue (Increase) = 102,600.00 x .05
Projected Monthly Revenue (Increase) = 5,130.00
Projected Revenue for February = Revenue (January) + Amount of

Increase
Projected Revenue for February = 102,600.00 + 5,130.00
Projected Revenue for February = 107,730.00

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On the other hand, decrease in revenue is computed as follows:
Projected Monthly Revenue (Decrease) = Revenue (August) x 5 %

Increase
Projected Monthly Revenue (Increase) = 144,041.14 x .05
Projected Monthly Revenue (Increase) = 7,202.06
Projected Revenue for September = Revenue (August) - Amount of

Decrease
Projected Revenue for September = 144,041.14 – 7,202.06
Projected Revenue for September = 136,839.08
Table 3
Projected Monthly Revenue
Month January February March April May June
Revenue 102,600.00 107,730.00 113,116.50 118,772.33 124,710.94 137,182.04
Month July August September October November December

Revenue 144,041.14 144,041.14 136,839.08 129,997.13 136,496.98 150,146.68
Important Assumptions:
February to May Increase of 5% from previous revenue
June Increase of 10% from previous revenue
July to August The same Revenue
September to October Loss of 5% from previous revenue
November Increase of 5% from previous revenue
December Increase of 10% from previous revenue
The numbers in the last table are very attractive, having revenues that
are increasing in numbers is a good sign that a business is growing. However, an
entrepreneur should not be overwhelmed by these revenues, as these are just
gross revenue, this is not the final amount of profit or income an entrepreneur will
get at the end of every period. Take note that the amount of net revenue is still
subjected to the expenses incurred in the operation of business.
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What’s More
After learning the calculations presented, you can now compute the
projected revenue by day, month and year based on your business concept.
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.
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.
Table 1
Name of Business ___________________________
Projected
Volume Projected
Cost Revenue
Mark-up Selling (D)
per (E)
____% Price Average
Merchandise/ Unit
(B) (C) No. of
Products (A)
Items Sold (Daily)
(Daily)
(B)= (A x
(A) (C)= (A+B) (D) (E) =(C x D)
.50)
Total
Use the calculations you have made in Table 1 to successfully
complete the information in Table 2 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. From January to May, 5 per cent
increase from previous sales. For the month of June, 10 per cent increase from
previous sales. For the months July to December, record the same sales every
month.
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Table 2
Projected Monthly and Yearly Revenue
Name of Business ___________________________
Projected Projected
Projecte
Volume Volume Projected
Selling d
Average No. Average No. of Revenue
Merchandise/ Price of Items Sold Revenue Items Sold
Products (Monthly) (Monthly) (Yearly) (Yearly)
(C)= F= (D x 30
G= (C x F) H= (D x 365 days) I= (C x H)
(A+B) days)
Total
Table 3
Projected Monthly Revenue
Name of Business ___________________________
Revenue

Revenue
What I Have Learned

Entrepreneurs use ______________ techniques to determine events
that might affect the operation of the business. Factors such as __________ and
_________ must be considered to avoid possible complications in the future. To
forecast revenues, it is best that the entrepreneur must be acquainted with the
_________, and __________ to determine the selling price of a product. This
way, the selling price is then multiplied to the projected volume to arrive with the
______________.
The entrepreneur should always present the assumptions to consider in
projecting revenues, may it be seasonality, economic slow down or changes in
costumer preferences and the like. This will help achieve the best educated
estimate of your revenues
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What I Can Do
It is understood that you now know how to calculate mark-up and selling
price of an item or merchandise. Let us try the following situations to see if you
have understood the concepts.
1. Kyle, a local entrepreneur is planning to sell 10 liter-bottled waters in his sari-sari

store. A local water purifying business in the city sells their 10-liter bottled water
for 20 pesos each. Kyle wants to add 25 per cent mark up from the original cost
of 10 liters bottled water. Calculate how much mark-up Kyle should add.
Determine how much should be the selling price for 10-liter bottled water.
2. Zoei sells fruits in a local fruit stand in the market. She gets her fruits from a local
wholesaler in the city. Zoei charges 40 per cent mark up for every kilo of
watermelon she gets. Suppose the cost per kilo of watermelon is 25, how much
is the selling price for one kilo of watermelon?
Assessment
Directions: Write True if the statement is correct, while False if the

statement is incorrect.
__________1. When sales exceed the cost to produce goods its result is called
forecasting.
__________2. Mark-up refers to the amount added to the cost of a product to determine
the selling price.
__________3. Forecasting is a planning tool that helps the entrepreneur cope with
uncertainties in his future operation.
__________4. Costs incurred through payment of utilities such as water and electricity
are called operating expenses.
__________5. Mang Mario is a fruit vendor. Selling fruits is an example of a service
concern business.
__________6. The selling price of a product is calculated by adding its cost per unit and
mark-up.
__________7. Merchandise or goods purchased are called Purchases.
__________8. Aling Becky sells suman in her neighbourhood, every day she can sell
75 pieces of suman for 5.00 pesos each. Her daily revenue is 325.00
pesos.
__________9. Loss is a result when cost to produce goods is greater than the sales.
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Additional Activities
1. Now that you have learned how to forecast revenues of the business, investigate
how these concepts are being applied by existing businesses in your community.
Using the table below, fill in the necessary information based on your
investigation.
Table 1
Name of Business ___________________________
Projecte
d Projected
Volume
Cost Revenue
Mark-up (D) (E)
per Selling Price
____% Average
Merchandise/ Unit (C)
(B) No. of
Products (A)
Items
Sold (Daily)
(Daily)
(B)= (A x (E) =(C x
(A) (C)= (A+B) (D)
.__%) D)
Example: (13.00 x 25%) (13.00 + 3.25) (16.25 x 5)
13.00 5
1. Notebook 3.25 16.25 81.25
Total
2. Suppose you wanted to start a merchandising business in your community, list

the product/s you want to sell and determine its mark-up and selling price. Use
the same formula for calculation found on the above table.
Merchandise/
Cost per Unit Mark Up Selling Price
Product
1.
2.
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Lesson Forecasting The Cost To
Be Incurred
2
What’s In
You have learned in Lesson 1 that the revenue generated by selling

RTW’s has a corresponding amount of costs incurred. This cost is the amount of
RTW before adding its mark-up price. Each piece of t-shirt has a corresponding
cost of 90.00 pesos, while each pair of jeans has a corresponding cost of 230.00
pesos. These costs are incurred each time revenues are generated. On the other
hand, the business also incurs costs in its operation, these costs are called
Operating Expenses. Operating expenses such as payment on Internet
connection, Utilities expense (Electricity), Salaries and Wages and Miscellaneous
are essential in the operation of the business; this allows the business to continue
to operate in a given period of time.
Now that you have learned what cost is, let us identify the costs and
expenses incurred by the business in generating revenues.
What’s New
Have you tried recording the amount of money you spend from your
daily allowance? You might be experiencing difficulties in making your allowance
meet your daily needs as a student. Try to fill in the information below to come up
with a breakdown of your daily allowance.
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Breakdown on Daily Allowance
Name: ______________________
Daily Allowance: Ᵽ __________

Less: Daily Expenses
Food Ᵽ_________
Fare _________
School Supplies _________
Recreation _________
Others _________ ___________
Total Ᵽ ___________
Were you able to get a positive total? You may have spent your daily
allowance wisely and saved some of your daily allowance. Did you spend all your
allowance and ended up with a zero total? You may have spent your allowance
on expenses essential to your needs as a student.
Considering your expenses as a student, a business also has expenses

necessary for its upkeep. It would be best for any business to arrive with a positive
total; this would mean profit for the business. Careful consideration and projection
of these factors could mean success for the business.
What is It
You have just learned about what cost is. This time let us identify costs
and expenses incurred by the business.
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 refers to goods and merchandise
at the beginning of operation of business or accounting period.
Purchases refer to the merchandise or goods purchased. Example:
Cost to buy each pair of Jeans or t-shirt from a supplier.
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Merchandise Inventory, end refers to goods and merchandise left at
the end of operation or accounting period.
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 these cost.
In a merchandising business such as Fit Mo’to Ready to Wear Online
Selling Business, the formula to compute for costs of goods sold is as follows:
Merchandise Inventory, beginning P XX.XX

Add: Net Cost of Purchases XX.XX
Freight-in XX.XX
Cost of Goods Available for Sale P XX.XX
Less: Merchandise Inventory, end XX.XX
Cost of Goods Sold P XX.XX
Let us calculate the cost of goods sold by Ms. Fashion Nista’s online
selling business for the month of January.
Table 4 shows the costs incurred during the first month of operation of Fit
Mo’to Ready to Wear Online Selling Business. Since Ms. Nista gets her stocks
from an online supplier, there is no need to order ahead and stock more items.
Therefore, there is no Merchandise Inventory, beginning as well as Merchandise
Inventory, end. Ready to wear items purchased online from the supplier are then
sold as soon as they arrived.
Cost of goods is calculated by simply multiplying the number of items sold

every month (300 t-shirts and 180 pairs of jeans) to its corresponding cost per
unit ( 90.00 pesos for every t-shirt and 230.00 pesos for every pair of jeans). A
cost in transporting the goods from the supplier to the seller (Ms. Nista) or Freight-
in is then added to Net Cost of Purchases.
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Table 4
Projected Cost of Goods Sold (Monthly)
Projected Volume
Average No. of
Type of Cost per Unit
Items Sold Projected Costs of
RTW's
(Monthly) Purchases (Monthly)
(A) F = (D x 30 days) K = (A x F)
T-Shirts 90.00 300 27,000.00
Jeans 230.00 180 41,400.00
Total 320.00 480 68,400.00
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. x 250.00

40 x 250.00 = 10,000.00
Table 5
Freight-in Paid by Ms. Nista Every Month
Projected Volume
No. of Items Freight In (January
Type of Sold (Daily) Average No. of Items Only)
RTW's Purchased (Monthly)
(A) F = (D x 30 days) J = (F/12) x 250

T-Shirts 10 300 6,250.00
Jeans 6 180 3,750.00
Total 16 480 10,000.00
Let us now substitute the values from Table 4 and Table 5. Since there
is no Merchandise Inventory, beginning and end, let us add Cost of Purchases
and Freight-in to get the Cost of Goods Sold.
Module 7
Merchandise Inventory, beginning P 00.00
Add: Net Cost of Purchases 68,400.00
Freight-in 10,000.00
Cost of Goods Available for Sale P 78,400.00
Less: Merchandise Inventory, end 00.00
Cost of Goods Sold P 78,400.00
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, and 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 amounts are presented
below:
Operating Expenses
Add: Internet Connection P 1,299.00
Utilities (Electricity) 800.00
Miscellaneous expense P 300.00
Total Operating Expense P 2,399.00
To calculate the total costs incurred by the business, cost of goods sold
and total operating expenses are then added. The calculation for the costs
incurred for the month of January is presented below:
Cost of Goods Sold P 78,400.00

Total Operating Expense P 2,399.00
Cost P 80,799.00
Module 7
Table 6
Projected Monthly Costs (Year 1)
Cost of Goods
Sold 78,400.00 82,320.00 86,436.00 90,757.80 95,295.69 104,825.26
Expenses 2,399.00 2,446.98 2,495.92 2,545.84 2,596.75 2,648.69

Total Cost &
Expenses 80,799.00 84,766.98 88,931.92 93,303.64 97,892.44 107,473.95
Cost of Goods
Sold 110,066.52 110,066.52 104,563.20 99,335.04 104,301.79 114,731.97
Expenses 2,701.66 2,755.70 2,810.81 2,867.03 2,924.37 2,982.85

Total Cost &
Expenses 112,768.19 112,822.22 107,374.01 102,202.06 107,226.16 117,714.82
Important
Assumptions
February-
May Increase 5% from Previous Costs Peak
Months
June Increase 10% from Previous Costs
Non-peak
July-August Same Costs Months
September Loss 5% of Previous Costs
October Loss 5% of Previous Costs
November Increase 5% from Previous Costs Peak
December Increase 10% from Previous Costs Months
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.
What’s More
After learning the calculations presented, you can now compute the
projected costs by month on your business concept. Use the template below and
fill in the necessary figures based on the scenario.
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
Module 7
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 are the same every month, fill in the necessary information in Table 6.
Table 4
Projected Cost of Goods Sold (Monthly)
Projected Volume
Merchandise/ Cost per Unit Average No. of

Products Items Sold (Monthly) Projected Costs of
Purchases (Monthly)
(A) F = (D x 30 days) K = (A x F)
Total
Table 5
Freight-in Paid
Projected Volume
No. of Items Average No. of Freight In (1 Month
Merchandise/
Sold (Daily) Items Purchased Only)
Products
(Monthly)
F = (D x 30 days) J = (F/12) x *Ᵽ200.00
Total
Module 7
Table 6
Projected Monthly Costs (Year 1)
Cost of
Goods Sold
Expenses
Total Cost &
Expenses
Cost of
Goods Sold
Expenses
Total Cost &
Expenses
What I Have Learned
The entrepreneur should always present the assumptions to consider in

projecting costs, may it be cost of goods sold or operating expenses. This will
help achieve the best educated estimates of your costs. The entreprenuer must
clearly identify costs incurred in the business operation. ________________ is
the amount of goods or merchandise sold during a period of time which incurs a
large portion of the total cost of a _________________ business. The cost of
goods sold can be calculated by simply multiplying _____________________ to
its corresponding ________________. A cost in transporting the goods from the
supplier to the seller or __________________ is then added to Net Cost of
Purchases.
Module 7
What I Can Do
Now that you know how to calculate the projected costs of a business,
look around and interview any business existing in your community such as sari-
sari stores or buy and sell business. Using the table for Projected Costs of Goods
Sold (Daily) below. Fill in the necessary figures from the business you have
selected.
Projected Cost of Goods Sold (Daily)

Business Name: ______________________
Projected Volume
Goods/ Cost per Unit Average No. of Projected Costs of
Merchandise Items Sold (Daily) Purchases (Daily)
Total
Assessment
Now, that you have finished the module, let us check what you have
learned. Answer the questions given below by encircling the letter of the correct
answer.
1. Profit or Loss is computed by subtracting cost / expenses from –
a. income/revenue c. sales
b. sales discount d. operating expenses
2. Sales is an account title used to describe goods or merchandise sold by a
business. What nature of business uses Sales?
a. Servicing c. Merchandising
b. Barber Shop d. Both Servicing and Merchandising
3. Irene sells fashion bags online. She gets each bag for P 150.00 from a local
supplier. She then adds P 100.00 as mark-up for each bag. How much is the
selling price of each bag?
a. P 200.00 b. P 250.00 c. P 300.00 d. P 350.00
4. A merchandising business earns through –
a. rendering services c. donating products
b. lending money d. buys and sells goods
Module 7
5. It is a tool that allows managers to make educated estimates on revenue and
costs of the business in order to cope up with uncertainties of the future –
a. estimating b. guessing c. forecasting d. benchmarking
6. Which of the following businesses use Service Income in recording revenues?
a. Beauty Salon b. Sari-sari store c. Movie House d. Hardware
7. It refers to the amount of merchandise or goods sold by the business for a given
period of time.
a. Operating Expense c. Deductions
b. Cost of Goods Sold d. Sales
8. Aling Coring sold 5 pieces of rugs. She bought the rugs for 20 pesos and sold it
for 35 pesos. How much is the total cost of goods sold?
a. P 80.00 b. P 90.00 c. P 100.00 d. P 110.00
9. Freight-in refers to the amount paid to transfer goods or merchandise purchased
from the _________.
a. buyer to the supplier c. buyer to buyer
b. supplier to the buyer d. supplier to supplier
10. The costs incurred through payment of utilities such as water, electricity, internet
connection is considered as –
a. costs c. operating expenses
b. purchases d. personal expense of the owner
11. Nathaniel sells bottled water in a nearby city bus terminal. Every day he can sell
30 pieces of bottled water at 20 pesos each. How much is Nathaniel’s daily sales?
a. P 900.00 b. P 800.00 c. P 700.00 d. P 600.00
12. The amount added to the cost of a product to determine the selling price is called?
a. mark-up b. discount c. mark-down d. sale
13. Lina sold all ten t-shirts for 1,500.00 pesos. Suppose she added 50.00 pesos as
mark-up price for every t-shirt. How much was the cost for every t-shirt sold?
a. P 80.00 b. P 90.00 c. P 100.00 d. P 110.00
14. It refers to goods and merchandise left at the end of operation or accounting
period.
a. Merchandise inventory, beginning c. Freight-in
b. Merchandise inventory, end d. Freight-out
15. The Total Cost and Expenses is calculated by –
a. adding cost and expenses c. adding revenue and expense
b. subtracting expenses from costs d. subtracting expense from revenue
Module 7
Additional Activities
1. Now that you have learned how to forecast revenues and cost of the
business, investigate how these concepts are being applied by existing
businesses in your community. Using the table below, fill in the
necessary information based on your investigation.
Daily Revenue and Cost

Name of Business: ______________________
Projected Projected
Volume Revenue Projected
Cost Mark-up Selling (D) (E)
Costs of
per Unit ____% Price
Merchandise/
(A) (B) (C) Average Purchases
Products No. of (Daily)
(Daily)
Items Sold
(Daily)
(B)= (A x C=A+
A D E=CxD K = (A x D)
.50) B
Ex. Bag 150.00 75.00 225.00 10 2250 1500
2. Conduct an interview with two local entrepreneurs in your community.

Using the table below as guide, ask how these entrepreneurs use
forecasting revenues and costs in making decisions for the good of
their businesses.
Decisions made while

Name of Entrepreneur Nature of Business referring to Forecasted
Revenue and Costs.
1. Mr. Dela Cruz Fruit Vendor Help me determine how

many should I purchase for
next month.
2.
3.
Module 7
Answer Key
Module 7
References
BOOKS
Ronaldo S. Batisan, DIWA Senior High School Series: Entrepreneurship Module. Diwa
Learning Systems Inc.
Angeles A. De Guzman. Entrepreneurship (For Senior High School, Applied subject,

ABM Strand. Lorimar Publishing, Inc 2018, 25 – 26.
Edralin, Divina M. Entrepreneurship. Quezon City: Vibal Group, Inc. 2016, 80 – 83.
Leedy, P. and Ormrod, J. Practical Research: Planning and Design 7 th Edition. (Merrill
Prentice Hall and SAGE Publications, 2001),
Nick L. Aduana, Entrepreneurship in Philippine Setting (for Senior High School), 2017
Dr. Eduardo A. Morato Jr., Entrepreneurship, 2016
Angeles A. De Guzman, Entrepreneurship for Senior High School Applied Subject ABM
Strand,Lorimar Publishing,p.1-5
Ronaldo S. Batisan, Entrepreneurship: Diwa Senior High School Series, Diwa Learning
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Eduardo A. Morato Jr., Entrepreneurship, 1st ed., Manila, Philippines: REX Books
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Raymund B. Habaradas and Tereso S. Tullao,Jr., Pathways to

Entrepreneurship,2016,Phoenics publishing house,p.17-28
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Philippine Setting For Senior High School, 184-199. Quezon City, Philippines: C&E
Publishing, 2016.
Aduana,N (2015). Financial statements; Preparation, presentation, analysis and

interpretation, presentation.Quezon City, Philippines: C & E Publishing,Inc.
Banastao,C.,& Frias, S.(2008) Entrepreneurship.Quezon City Philippines: C & E

Publishing,Inc.
Module 7
Nick L. Aduana, Etrepreneurship in Philippine Setting for Senior High School, 2017,
C&E publishing, Inc.p.46-51
Raymund B. Habaradas and Tereso S. Tullao,Jr., Pathways to
Entrepreneurship,2016,Phoenics publishing house,p.17-28
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Quezon City.C & E Publishsing, Inc. 2016.
Morato, Eduardo A. Entrepreneurship. Manila. Rex Bookstore, Inc. 2016.
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Learning System Inc. Legaspi Village, Makati City Philippines, copyright 2016.
Lopez, Rafael Jr. Basic Accounting for Non-Accountants. 2015 Lopez, Rafael Jr.
Fundamentals of Accounting. 2016
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Management. Vibal Group Inc. 2016
Lopez, Jr. Rafael M. Fundamentals of Accounting, 2014-2015 Edition Morato, Eduard,
Jr. A. Entreprenuership, Rex Bookstore 2016
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Module 7
https://en.wikipedia.org/wiki/Business_model
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Module 7
For inquiries or feedback, please write or call:
Department of Education - Bureau of Learning Resources (DepEd-BLR)
Ground Floor, Bonifacio Bldg., DepEd Complex

Meralco Avenue, Pasig City, Philippines 1600
Telefax: (632) 8634-1072; 8634-1054; 8631-4985
Email Address: blr.lrqad@deped.gov.ph * blr.lrpd@deped.gov.ph

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Quarter 2 — Module 7

Borrowed materials included in this module are owned by the respective

Address: region10@Printed in the Philippines by: Department of Education

For the Learner

Revenue is a result when sales exceed the cost to produce goods or

This module is divided into two lessons:

Lesson 1 – Forecasting the revenues of the business

Lesson 2 – Forecasting the costs to be incurred

To be able to successfully complete this module, previous knowledge in

Forecasting is a tool used in planning that aims to support management or

 identify essential factors in forecasting revenues and costs;

Encircle the letter that bests correspond to your answer.

You may now start learning!

Let us now examine how the sale of products generates revenues. In

Estimated Time Actual Time

Considering these factors is essential in making informed estimates by

Revenue is a result when sales exceed the cost to produce goods or

Mark Up Price = ( Cost x Desired Mark Up Percentage)

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

T-Shirts 90.00 45.00 135.00 10 1,350.00

Jeans 230.00 115.00 345.00 6 2,070.00

Total 320.00 160.00 480.00 16 3,420.00

For example, in Table 1 the daily revenue is 3,420.00. To get the

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

Projected Yearly Revenue = Projected Daily Revenue x 365 days

Projected Yearly Revenue = 3,420.00 x 365

Projected Yearly Revenue = 1,248,300.00

T-Shirts 135.00 300 40,500.00 3,650 492,750.00

Jeans 345.00 180 62,100.00 2,190 755,550.00

Total 480.00 480 102,600.00 5,840 1,248,300.00

Computation for assumed increase of reveneue on specific months is as

Projected Monthly Revenue (Increase) = Revenue (January) x 5 %

Projected Monthly Revenue (Increase) = 102,600.00 x .05

Projected Monthly Revenue (Increase) = 5,130.00

Projected Revenue for February = Revenue (January) + Amount of

Projected Revenue for February = 102,600.00 + 5,130.00

Projected Revenue for February = 107,730.00

Projected Monthly Revenue (Decrease) = Revenue (August) x 5 %

Projected Monthly Revenue (Increase) = 144,041.14 x .05

Projected Monthly Revenue (Increase) = 7,202.06

Projected Revenue for September = Revenue (August) - Amount of

Projected Revenue for September = 144,041.14 – 7,202.06

Projected Revenue for September = 136,839.08

Month July August September October November December

Month July August September October November December

What I Have Learned

1. Kyle, a local entrepreneur is planning to sell 10 liter-bottled waters in his sari-sari

Directions: Write True if the statement is correct, while False if the

2. Suppose you wanted to start a merchandising business in your community, list

You have learned in Lesson 1 that the revenue generated by selling

Daily Allowance: Ᵽ __________

Considering your expenses as a student, a business also has expenses

Merchandise Inventory, beginning P XX.XX

Cost of goods is calculated by simply multiplying the number of items sold

Table 5 shows how freight-in is calculated.

480 pcs. / 12 pcs. x 250.00