Question

How to prepare sales budget?

Answer 1

Generally Sales Budget is the principal Budget in every organisation.Sales Budget contains an itemization of companys sales expectation for the budget period, in both units and dollars. If a company has a Large number of products, it is usually aggregated its expected sales into a smaller number of categories or geographic or region, Otherwise it becomes too dificult to generate sales estimate for this budget. The sales budget is usually presented in either a monthky or quarterly or yearly format, presentinh only annual sales information is too aggregated, and so provides little actionable information.

The sales manager generally contribute the details of the sales product and they actively reach their targets by preparing the sales Budget.

The basic calculation in the Sales Budget is to itemize the number of units sales expected in one row, and then list the average sales expected unit price in one row, with the total revenues appearing in a third row. The unit price may be adjusted for marketing promotions. If any sales discounts or sales returns are anticipated , these items are also listed in the sales Budget.

It is the best possible job for forecasting. Since the information in the sales budget is used by the other Budgets(Such as Production and Direct materials Budget).

The Projected unit sales information in the Sales Budget feeds directly into the production Budget, from which the Direct materials and Direct labour budgets are created. The Sales budget is also used to give managers a general sense of the scale of operations, for when they create the Overhead Budget and Selling budget and Administrative expenses budget. The total net sales listed in the sales Budget are carried forward into the revenue line item in the Master Budget.

Example Of Sales Budget

XYZ Company plans to produce an array of plastic pails during the upcomming budget year, all of which falls into a single prouct category. Its sales forecasts are as follows:

XYZ Company - Sales Budget For the Year ended june 30,20XX:-

Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Forecasted Sales (Unit Sales)	5,500	6,000	7,000	8,000
x Price per unit	$10	$10	$11	$11
Total Gross sales	$55,000	$60,000	$77,000	$88,000
(Less) Sales Discount & Allowances	$1,100	$1,200	$1,540	$1,760
= Total Nat Sales	$53,900	$58,800	$75,460	$86,240

XYZ's sales manager expects that increased demand in the second Half of thhe will allow it to increase its unit price from $10 to $11. Also, the sales manager expects that the company's historical sales discounts and allowances % of 2% of Gross sales will continue through the budget eriod.

The example of sales budget is simplistic, since it assumes that the company only sells in one product category . Inreality, This example might have detailed example with the Sales Budget, where it would occupy a single line item.

In case of subsidaries the Sales Budget may be revised or terminate or sell during the budget period.