Final answer:
The Sullivan family spends 60% of their net monthly income on food, clothing, and housing. While the financial budgets focus on the financial aspects, the operating budgets are related to the operational activities of a business. It is important to have both types of budgets to effectively plan and manage the resources and financial health of a company.
Step-by-step explanation:
The question asks what percent of the Sullivan family's net monthly income is spent on food, clothing, and housing. To calculate this, we need to sum the expenses for these categories and then divide by the total net monthly income, and finally multiply by 100 to get the percentage.
Their expenses on food are $1,248, on clothing are $936, and on housing are $2,496. These expenses add up to $1,248 + $936 + $2,496 = $4,680. The net monthly income is $7,800. So the calculation is ($4,680 / $7,800) * 100 which equals 60%.
Therefore, the Sullivan family spends 60% of their net monthly income on food, clothing, and housing.
The budgets can be classified as follows:
Financial Budgets:
Cash Budget
Budgeted Balance Sheet
Budgeted Income Statement
Operating Budgets:
Sales Budget
Capital Expenditures Budget
Raw Materials Purchases Budget
Selling and Admin Expense Budget
Purchases Budget
Cash Receipts Budget
Production Budget
Financial budgets focus on the financial aspects of a company's operations, such as cash flow, balance sheet, and income statement. They help in planning and tracking the financial resources of a business.
Operating budgets, on the other hand, are concerned with the day-to-day operations of a company. They include budgets related to price, production, purchases, expenses, and cash receipts. These budgets help in managing the operational activities and resources of a business.
For example, the cash budget falls under the financial budget as it focuses on the inflows and outflows of cash in a specific period. It helps in determining the cash position of a company and managing its liquidity.