To determine how to modify the budget so that there will be a positive actual net income after the $200 reduction in actual income, let's first summarize the current situation:
- Original Budgeted Income: $1250
- Adjusted Actual Income: $1050 (which is $200 less than budgeted)
Expenses (as budgeted):
- Rent: $450
- Utilities: $150
- Food: $220
- Clothes: $200
- Cell Phone: $75
Total Budgeted Expenses: $450 + $150 + $220 + $200 + $75 = $1095
Budgeted Net Income:
- Budgeted Income: $1250
- Budgeted Expenses: $1095
- Budgeted Net Income: $1250 - $1095 = $155
With the reduced actual income, the new actual net income calculation is:
Actual Net Income:
- Actual Income: $1050
- Budgeted Expenses: $1095
- Actual Net Income: $1050 - $1095 = -$45 (a negative net income)
To achieve a positive actual net income, actual expenses must be reduced below the actual income of $1050.
Analysis of Options:
a. Increasing Food and Utilities, Decreasing Clothes and Rent: This would not help in achieving a positive net income, as it suggests increasing some expenses, which could lead to even more negative net income.
b. Reducing Rent and Utilities: If we reduce these fixed expenses, we might lower the total expenses and help return to a positive income.
c. Reducing Food and Clothes: This can also free up some funds to keep total expenses below $1050.
d. This budget cannot be modified: This is not feasible, as we can make adjustments to expenses to balance the budget.
Conclusion:
Options b and c propose valid strategies for modifying the budget to create a positive net income. However, b appears more direct since it targets fixed (often less flexible) expenses in rent and utilities.
Therefore, among the given options, the best fit would be:
b. This budget can be modified by reducing the amount spent on rent and utilities, thereby reducing overall expenses to have the maximum amount of money for all other expenses.
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