Question

Examine the following budget:

Monthly Budget
Budgeted Amount
Actual Amount
Income
Wages

$1000

$850
Expenses
Car - gas, insurance
Food & Personal Items
Cell Phone
College Savings
Recreation
Clothes

$300
$200
$75
$200
$75
$85

$300
$220
$75
$200
$80
$60
Net Income
$65


What is the actual net income for the month? What, if any, changes could have been made to the actual amounts this month to keep the actual net income at a positive value?
a.
The actual net income for the month is -$85. Less money could have been spent on food, recreation and clothes.
b.
The actual net income for the month is $85. No changes necessary.
c.
The actual net income for the month is -$85. No changes necessary.
d.
The actual net income for the month is $85. Less money could have been spent on food, recreation and clothes.

Answer 1

Compute actual net: 850 (income) − (300+220+75+200+80+60 = 935) = −85. So the actual net income is −$85.

You need to reduce expenses or increase income by at least $86 to be positive. Choice (a) is correct: actual net = −$85, and spending could have been cut (for example reduce food by $40 to $180, recreation by $20 to $60, and clothes by $26 to $34 — total savings $86) to make the month positive.