2.2 Flashcards
what is a sales forecast
prediction in the value earnt from selling a good
what’s the purpose of a sales forecast
- helps inform investors
- helps with human resource planning
- helps plan production
- helps plan resources
- helps reduce waste
what are the 3 factors that effect sales forecasts
- consumer trends
- economic variables
- actions of competitors
what are the 6 difficulties of a sales forecast
- no previous data exists
- markets change rapidly
- external influences
- inaccurate market research
- expensive - no budget avaliable
- external factors
what are the calculations for sales revenue and volume
volume = sales rev/profit
revenue = price x quantity
calculation for breakeven
fixed costs / CPU (sp-vc per unit)
calculation for margin of safety
actual sales - BE level of output
6 benefits of BE analysis
- forecast sales
- gives target
- easy to calculate
- quick
- helps prove finances
- useful for new product
5 limitations of BE analysis
- based on assumptions
- hard if sell +1 product
- assumes same VC
- assumes single selling price
- out of date quickly
what is a budget
financial plan of income expenditure and profit
what’s the purpose of budgeting
- control spending
- reduce fraud
- calculate variances
- motivates staff
- establish priorities
- improve efficiency
what are the two types of budgeting
- historical
- zero-based
what is zero-based budgeting
no budget set, all spending must be authorised by head role
+and- of zero based budgeting
+increased efficiency
+greater cost control
+easier to adapt
+more flexible
-time consuming
- demotivating for staff
-decisions not made in department level
what is historical budgeting
budget set on based on previous years spending
