Business Budget: Income & Expenses

Budget Challenge: Trade Offs and Opportunity Costs

Materials Needed:

Paper and markers

• A list of expenses and their costs (see examples below)

• Calculator

• Timer

• Instructions:

Introduction (5 minutes):  Begin by explaining that budgeting involves making choices because we often have limited money to spend. These choices require trade-offs, and usually there is a cost involved with missing an opportunity.

1. Team Formation:
   Divide the students into small teams.

2. Budget Challenge :
   Give each team a sheet with the list of expenses and income. 

3. Break it down now:

Step 1:
Circle any words you do not know on these sheets. We will look at this as a class.

Step 2:
On your sheet identify what things are income and what things are expenses. You may want to just underline one or the other.

Step 3:
Check what timeframe each item has. You want to make a monthly budget.
How many weeks in a month? How many months in a year?

Step 4:
Multiply or divide to make it monthly
i.e. if the amount is weekly you need to multiply it by 4, if it is yearly you need to divide it by 12.

Step 5:
Add up the income. Add up the expenses. Put these on the second page and show your working.
Remember for cents you need to write it as two decimal places!

Step 6.
To find the profit you need to use this equation. Profit= Income - Expenses.
How can you write a sentence or two to describe what is happening with the cafe's budget?

4. No profit?
   You will need to look over the list to decide what you could cut to make profit.
   Year 9s: You simply need to make profit
   Year 10s: Determine the desired profit margin you aim to achieve (10% 20% 50% ?!)
   
   

5. Trade-off(s) and Opportunity cost(s)
   With every decision you make there will be a cost. Write these down in the boxes.