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Paul has been very grateful for the support you have given him. He is surprised at the difficulties that have
been experienced at Headliners Hair Salon. He is keen for more information and have asked you to provide
further detail on the causes of the problems at the salon and how you feel these problems could have been
overcome. Add the following to the information pack you prepared in task two;
1. Look through the budget, break down the elements of the budget, determine why the problems exist (P6)
and what issues this will create for the hairdressers. (M4)
2. Evaluate these problems, make final judgments on what the problems are and give some
recommendations as to what they can do to try and solve the problem. (D3)
Monthly budget
Cumulative
budget
Actual monthly
Actual
cumulative
Cumulative
Variance
January
10,000
10,000
8,500
8,500
(1500)
February
10,000
20,000
9,000
17,500
(2500)
March
12,000
32,000
10,000
27,500
(4500)
April
12,500
44,500
10,500
38,000
(6500)
May
13,000
57,500
11,500
49,500
(8000)
June
15,000
72,000
13,000
62,500
(9500)
Total
72,000
62,500
Cost budget for Headliners Hair Salon (see below for breakdown)
Month
Monthly budget
Cumulative
Budget
Actual monthly
Actual
Cumulative
Cumulative
Variance
January
11,250
11,250
11,880
11,880
(630)
February
6,250
17,250
6,380
18,260
(1010)
March
5,750
23,250
6,880
25,140
(1890)
April
8,250
31,500
8,880
34,020
(2520)
May
7,950
39,450
8,080
42,100
(2650)
June
7,450
46,900
8,080
50,180
(3280)
Total
46,900
50,180
Month
purchas
es
Wages
Rent
and
rates
Januar
y
4500
1000
400
Februa
ry
3000
1000
400
March
4000
1000
April
4500
May
Light
and
Heat
Advertisi
ng
Insuranc
es
Equipme
nt
Vehicle Motor
s
expens
es
Total
250
400
5000
250
80
11880
250
400
500
250
80
6380
400
250
400
500
250
80
6880
1000
400
250
400
2000
250
80
8880
5000
1000
400
250
400
200
250
80
8080
June
5500
1000
400
250
400
200
250
80
8080
Total
9000
6000
2400
1500
2400
8,400
1500
480
50180
500
500
1000
Actual costs
Wages, rent and rates, lights and heat and vehicle costs were as expected
!2
perform these tasks can increase the accuracy, and in turn help better determine profits. This will
better prepare the business for financial losses and indicate where Headliners may need to seek
extra finances.
As Paul is still in his first few months of business operation, it is important that he maintains a
satisfactory cash flow for his business. Some months may require more expenditures than others.
He should ensure that he seeks enough finances not just to cover the start-up and immediate costs,
but enough finance to ensure that he has contingency plans for possible losses. It is crucial that he
has enough money in the bank to cover costs to avoid bankruptcy, or possibly foreclosure.
Should Paul begin to generate profits, he should make sure that he retains profits for future
spending for the business, before extracting these funds from the business. It is important that he
has money in the business account again for future costs and issues that may arise. He should only
begin to extract money from the business when steady profits are generated.
!4