Sales forecasting 2.2.1

Question 1

what is sales forecasting

Answer 1

the process of estimating future sales accurately

Question 2

what is extrapolation

Answer 2

using trends from historical data to forecast the future

Question 3

give 5 reasons why an accurate sales forecast is needed

Answer 3

1. know how many workers to hire
2. do I need temporary workers or any redundancies?
3. how many products need to sell to meet sales
4. how much stock/materials are needed
5. will i need to outsource?

Question 4

give 6 factors which affect sales forecast

Answer 4

• changing tastes and preferences
• globalisation
• taxation and inflation
• quality issues
• unmotivated workers
• PESTLE + C

Question 5

why are sales forecasts difficult to predict

Answer 5

business’s assume that the future sales will follow the same trend/path as recent sales however, this may not be accurate in the long term because markets are susceptible to economic change and competitors

Question 6

in a correlation, which is the independent variable, and which is the dependant variable

Answer 6

variable 1 (x axis) = independent
variable 2 (y axis) = dependant

Question 7

give an example of a positive correlation

Answer 7

temperature rises, so ice cream sales increase

Question 8

give an example of a negative correlation

Answer 8

as the price of complementary goods increases, demand decreases

Question 9

give 4 advantages of using extrapolation and correlation for sales forecasting

Answer 9

1. helps to plan to an extent
2. easy
3. might help to secure funding
4. useful for reliable products

Question 10

give 4 disadvantages of using extrapolation and correlation for sales forecasting

Answer 10

1. past is most likely not an accurate representation of the future
2. the further you extrapolate, the more accuracy decreases
3. unexpected events may affect demand
4. business may be biased