To determine the simplest change that can be made to the budget to produce more savings next month, let's carefully analyze the components of the budget:
1. Net income / Total income:
- Budgeted: [tex]$400.00
- Actual: $[/tex]375.00
2. Fixed expenses:
- Rent: [tex]$200.00 (unchanged between budgeted and actual)
- Bus pass: $[/tex]20.00 (unchanged between budgeted and actual)
- Total fixed: [tex]$220.00 (unchanged between budgeted and actual)
3. Variable expenses:
- Food:
- Budgeted: $[/tex]75.00
- Actual: [tex]$125.00 (increase of $[/tex]50.00)
- Discretionary:
- Budgeted: [tex]$30.00
- Actual: $[/tex]50.00 (increase of [tex]$20.00)
- Total variable:
- Budgeted: $[/tex]105.00
- Actual: [tex]$175.00 (increase of $[/tex]70.00)
4. Savings:
- Budgeted: [tex]$75.00
- Actual: -$[/tex]20.00 (reduction of [tex]$95.00)
Next, we examine the possible actions listed:
1. Add to fixed expenses: This would decrease savings, which is counterproductive.
2. Decrease food expenses: Food expenses actual ($[/tex]125.00) exceed budgeted ([tex]$75.00) by $[/tex]50.00, indicating that reducing food expenses aligns better with the budget and frees up money to increase savings.
3. Reduce rent payments: Rent is a fixed expense that is already set and typically not easily adjusted month-to-month.
4. Increase total income: Increasing income is beneficial but may not be straightforward or simple to achieve on short notice.
Given this analysis, the simplest and most immediate change to increase savings is to:
Decrease food expenses.
Therefore, reducing food expenses is the optimal approach to produce more savings next month.
