The actual income for this month has been reduced by $200. How can this budget be modified so there will be a positive actual net income?
| Monthly Budget | Budgeted Amount | Actual Amount |
| :------------- | :------------- | :------------- |
| Income Wages | $1250 | $1050 |
| Expenses | | |
| Rent | $450 | $ |
| Utilities | $150 | $ |
| Food | $220 | $ |
| Clothes | $200 | $ |
| Cell Phone | $75 | $ |
| Net Income | $155 | $ |
A. This budget can be modified by increasing the amount spent on food and utilities and decreasing the amount spent on clothes and rent, thereby maintaining a positive actual net income.
B. This budget can be modified by reducing the amount spent on rent and utilities thereby...
Answer (1)
Calculate total budgeted expenses: $450 + $150 + $220 + $200 + $75 = $1095.
Calculate actual net income: $1050 - $1095 = -$45. - Determine required expense reduction: Expenses need to be reduced by at least $46 to achieve a positive net income.
Modify the budget by reducing expenses such as rent and utilities to achieve a positive actual net income: Reduce rent and utilities .
Explanation
Analyze the problem Let's analyze the problem. The actual income is reduced by $200, bringing it down to $1050. We need to figure out how to modify the budget so that the actual net income is positive. First, let's calculate the total budgeted expenses.
Calculate total budgeted expenses The budgeted expenses are: Rent: $450 Utilities: $150 Food: $220 Clothes: $200 Cell Phone: $75
So, the total budgeted expenses are $450 + $150 + $220 + $200 + $75 = $1095.
Calculate actual net income Now, let's calculate the actual net income if we keep the expenses at the budgeted amount. The actual income is $1050, and the total budgeted expenses are $1095. Therefore, the actual net income would be $1050 - $1095 = -$45.
Determine required expense reduction Since the actual net income is -$45, we need to reduce the expenses by at least $46 to achieve a positive net income (to get at least $1). Now, let's evaluate the given options to see which one helps us achieve this.
Evaluate the options Option a suggests increasing the amount spent on food and utilities and decreasing the amount spent on clothes and rent. This is not a good approach because increasing expenses will further reduce the net income. We need to reduce expenses, not increase them.
Without the full text of option b, we can't fully evaluate it. However, the prompt states that option b involves reducing the amount spent on rent and utilities. This sounds promising, as reducing expenses is what we need to do. Let's assume option b reduces expenses by at least $46.
Conclusion Therefore, the budget can be modified by reducing the amount spent on rent and utilities, thereby achieving a positive actual net income.
Examples
Imagine you are managing a household budget and suddenly your income decreases. To ensure you still have money left over (positive net income), you need to cut down on your expenses. This problem demonstrates how to identify necessary reductions in spending to maintain financial stability when faced with a decrease in income. By carefully analyzing and adjusting your budget, you can avoid going into debt and ensure you have enough money for essential needs.
