Question

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 Utilities Food Clothes Cell Phone $450 $150 $220 $200 $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 reducing overall expenses to have the maximum amount of money for all other expenses. c. This budget can be modified by reducing the amount spent on food and clothes, thereby reducing overall expenses to have the maximum amount of money for fixed expenses and maintaining a positive actual net income. d. This budget cannot be modified.

Answer 1

c. This budget can be modified by reducing the amount spent on food and clothes, thereby reducing overall expenses to have the maximum amount of money for fixed expenses and maintaining a positive actual net income.

You can't reduce fixed expenses. These are expenses that are constant every month like rent expense, utility payments, and cell phone plan. The only expenses you can reduce are food and clothes. These expenses are called variable expenses meaning the amount of these expenses varies. Thus, it can be manipulated.