Question

The sales forecast is often the starting point of the budgeting process. Identify and discuss key assumptions that are made in the creation of the sales forecast. How would you defend these assumptions when presenting your budget to the budget committee?

Please type out and use a different answer than what's already on the Chegg database please and thank you

Answer 1

Sales budget is the fundamental budget based on which all other budgets are built up. The sales budget is a forecast of total sales expressed in terms of money and quantity . It is essentially a forecast of sales to be achieved in a budget period.

Sales forecasts are influenced by a variety of factors external as well as internal. External factors can be general economic conditions, competition, laws and regulation, technological changes, Internal factors consist of sales price, sales trend, new launches, etc

Some key assumptions in creation of sales forecast includes but not limited to

• Past sales figures and trends
• Plant capacity
• General trade prospects
• Potential market
• availability of material and supply
• seasonal fluctuations
• Competition in market

Budgets when presented to Budget committee should be realistic and have strong underlying assumptions to justify it. Hence it is important to study each and every factor affecting sales budget and strongly justify it. All Sales budgets presentations should be supported with working before presentation to budget committee.

Assumptions can be defended to budget committee through:

• Market research
• Tracking competition
• Test marketing
• Marketing surveys