The actual income for this month has been reduced by \[tex]$200. How can this budget be modified so there will be a positive actual net income?

\begin{tabular}{|l|r|c|}
\hline
\textbf{Monthly Budget} & \textbf{Budgeted Amount} & \textbf{Actual Amount} \\
\hline
\textbf{Income} & & \\
Wages & \$[/tex]1250 & \[tex]$1050 \\
\hline
\textbf{Expenses} & & \\
Rent & \$[/tex]450 & \\
Utilities & \[tex]$220 & \\
Food & \$[/tex]200 & \\
Clothes & \[tex]$75 & \\
Cell Phone & \$[/tex]155 & \\
\hline
\textbf{Net Income} & & \\
\hline
\end{tabular}

a. This budget can be modified by reducing the amount spent on rent and utilities, thereby reducing overall expenses to maintain a positive actual net income.

b. This budget can be modified by reducing the amount spent on food and clothes, thereby ensuring a positive actual net income.



Answer :

To determine how the budget can be modified so that there will be a positive actual net income, let's go through the numbers step-by-step.

### Original Monthly Budget
- Income:
- Budgeted: [tex]$1250 - Actual: $[/tex]1050 (reduced by [tex]$200) - Expenses: - Rent: $[/tex]450
- Utilities: [tex]$220 - Food: $[/tex]200
- Clothes: [tex]$75 - Cell Phone: $[/tex]155

### Step 1: Calculate the Total Original Expenses
Sum up all the original budgeted expenses:
[tex]\[ \$450 + \$220 + \$200 + \$75 + \$155 = \$1100 \][/tex]

### Step 2: Calculate the Actual Net Income
Subtract the total original expenses from the actual income to find the actual net income:
[tex]\[ \text{Actual Income} - \text{Total Original Expenses} = \$1050 - \$1100 = -\$50 \][/tex]
This results in a negative net income of [tex]$-50$[/tex], meaning expenses exceed income.

### Step 3: Modify the Budget to Achieve Positive Net Income
To convert this negative net income into a positive one, we need to reduce the expenses. Here is one proposed modification strategy:

#### Strategy: Reduce Rent and Utilities
- Rent: Reduced by [tex]$50 - Original: $[/tex]450
- Modified: [tex]$400 - Utilities: Reduced by $[/tex]20
- Original: [tex]$220 - Modified: $[/tex]200

Modified expenses are now:
- Rent: [tex]$400 - Utilities: $[/tex]200
- Food: [tex]$200 (unchanged) - Clothes: $[/tex]75 (unchanged)
- Cell Phone: [tex]$155 (unchanged) ### Step 4: Calculate the Modified Total Expenses Sum up the modified expenses: \[ \$[/tex]400 + \[tex]$200 + \$[/tex]200 + \[tex]$75 + \$[/tex]155 = \[tex]$1030 \] ### Step 5: Calculate the Modified Net Income Subtract the modified total expenses from the actual income: \[ \text{Actual Income} - \text{Total Modified Expenses} = \$[/tex]1050 - \[tex]$1030 = \$[/tex]20 \]

This results in a positive net income of [tex]$20. ### Conclusion To convert the original budget deficit to a surplus, the best modification strategy is: - Reduce the amount spent on rent from $[/tex]450 to [tex]$400. - Reduce the amount spent on utilities from $[/tex]220 to [tex]$200. This will adjust the total monthly expenses to $[/tex]1030, resulting in a positive net income of $20.