Quarter 2 — Module 7

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Module 7
 Entrepreneurship – Grade 12
Alternative Delivery Mode
Quarter 2 - Module 7 Second Edition, 2021

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Development Team of the Module

Writers: Joel Y. Yacas Janice B. Dominguez
Naneth M. Valdehuesa Ronee D. Quicho
Mary Cris A. Maquilan Marylinda T. Puzon
Charity E. Parel Denver E. Neri
Lorena Fe S. Anub Ethel Lalaine B. Morales
Evaluators: Cherryl F. Descallar Jessie Cris N. Abrogueña
Eddy Lou T. Hamak Milger A. Baang Sherriemae V. Reazol

Illustrator & Layout Artist: PSSg Edzel M. Dominguez, Ivy O. Niñeza

Management Team: Arturo B. Bayocot, PhD, CESO III, Regional Director

Victor G. De Gracia Jr., PhD, CESO V, ARD

Mala Epra B. Magnaong, Chief CLMD
Bienvenido U. Tagolimot, Jr., PhD, Reg EPS ADM Elson C.
Jamero, EPS-Designate-TLE
Marie Emerald A. Cabigas, PhD, Reg EPS, LRMS
Erlinda G. Dael, CESE, PhD, CID Chief
Celieto B. Magsayo, Div LR Supervisor
Andrian S. Tecson, Div ADM Coordinator

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Entrepreneurship
Quarter 2 – Module 7

Forecasting Revenues and

Costs Department

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 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.

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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 might affect the
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 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

4. The selling price of an item or merchandise is computed by adding cost per unit and
__________?
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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
b. Operating Expenses d. Loss

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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 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.

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 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.

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

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 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 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

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 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.

Table 1 Projected Daily Revenue

Fit Mo'to Ready to Wear Online Selling Business

Projected
Volume Projected
Cost per Mark-up Selling (D) Revenue
Unit 50% Price Average (E)
Type of
RTW's (A) (B) (C) No. of
Items Sold (Daily)
(Daily)
(A) (B)= (A x .50) (C)= (A+B) (D) (E) =(C x D)

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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
Fit Mo'to Ready to Wear Online Selling Business

Projected Projected
Volume Projected Volume Projected
Selling Average Revenue Average No. Revenue
Type of Price No. of Items of Items Sold
RTW's Sold (Yearly)
(Monthly) (Yearly)
(Monthly)
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
10
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 Fit
Mo'to Ready to Wear Online Selling Business

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.
 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
Projected Daily Revenue
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
(A) (C)= (A+B) (D) (E) =(C x D)
x .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.
 Table 2 Projected Monthly and Yearly Revenue
Name of Business ___________________________

Projected Projected
Volume Projecte d Volume Projected
Selling Revenue Revenue
Average No. Average No. of
Merchandise/ Price
of Items Sold Items Sold
Products (Monthly) (Monthly) (Yearly) (Yearly)
(C)=
F= (D x 30 days) G= (C x F) H= (D x 365 days) I= (C x H)
(A+B)

Total

Table 3
Projected Monthly Revenue
Name of Business ___________________________

Month January February March April May June

Revenue

Month July August September October November December

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

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.

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 Projected Daily Revenue

Name of Business ___________________________

Projecte
d Projected
Volume
Cost Revenue
Mark-up (D)
per (E)
____% Selling Price (C) Average
Merchandise/ Unit
(B) No. of
Products (A)
Items
Sold (Daily)
(Daily)
(B)= (A x .__%) (E) =(C x D)
(A) (C)= (A+B) (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.

Lesson Forecasting The Cost

To
2 Be Incurred

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.

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.
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 Freightin is
then added to Net Cost of Purchases.

Table 4
Projected Cost of Goods Sold (Monthly)
Fit Mo'to Ready to Wear Online Selling Business

Projected Volume
Average No. of
Type of Cost per Unit
Items Sold Projected Costs of Purchases
RTW's
(Monthly) (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

Type of RTW's No. of Items Projected Volume Freight In (January

 Average No. of Items
Sold (Daily) Only)
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.

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

Table 6 Projected Monthly Costs (Year 1) Fit Mo'to Ready to Wear

Online Selling Business
Month January February March April May June

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

Month July August September October November December

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
Increase 5% from Previous Costs Peak
FebruaryMay
Months
Increase 10% from Previous Costs
June
Non-peak
Same Costs Months
July-August
Loss 5% of Previous Costs
September
Loss 5% of Previous Costs
October Peak
Increase 5% from Previous Costs
November Months
Increase 10% from Previous Costs
December
 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 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 Items

Products 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
Merchandise/ No. of Items Average No. of
Freight In (1 Month Only)
Products Sold (Daily) Items Purchased
(Monthly)
 F = (D x 30 days) J = (F/12) x *Ᵽ200.00

Total

Table 6 Projected Monthly Costs (Year 1)

Month January February March April May June

Cost of Goods
Sold

Expenses
Total Cost &
Expenses

Month July August September October November December

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.

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 sarisari 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 Items Projected Costs of Purchases
Merchandise Sold (Daily) (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
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

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 per Mark-up Selling (D) (E)
Costs of
Unit ____% Price
Merchandise/ (A) (B) (C)
Average Purchases
Products No. of (Daily)
(Daily)
Items Sold
(Daily)
(B)= (A C=A+B
A D E=CxD K = (A x D)
x .50)
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 referring

Name of Entrepreneur Nature of Business to Forecasted Revenue and
Costs.
1. Mr. Dela Cruz Fruit Vendor Help me determine how many
should I purchase for next
month.
2.
3.

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