Page 195 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes Materials Procurement or Purchase Budget (Units)
Material A Material B
Estimated Consumption
For A 2 units × 54, 000 1,08,000
For B 3 units × 54,000 1,62,000
Add: Closing Stock 13,000 16,000
1,21,000 1,78,000
Less: Opening Stock 12,000 15,000
Estimated Purchases 1,09,000 1,63,000

Sales Budget

Sales Budget is an estimate of anticipation of sales in the near future prepared by the responsible
person for the sale of a product by considering the various factors of influence. Sales budget is
usually prepared in terms of quantity and value. The following factors are normally considered
for the preparation of sales budget of a firm:
1. Last sales figures.
2. Estimates of the salesmen who is frequently operating in the market, known much greater
than any body in the market.
3. Capacity of the plant and machinery to produce.
4. Funds availability.
5. Availability of raw materials to the tune of demand in the respective time period.

6. Changes in the taste and preferences of the customer or consumer.
7. Changers in the competition structure - Monopoly to Perfect competition — Previously
BSNL was known as DOT as a monopoly in the market in affording the services till early
2000. Then later, the changes taken place in the market environment i.e. competition due
to invasion of new entrants like Reliance, Hutch, Bharti tele ventures and so on; warrants
careful preparation of sales budget of number of telephone connection expected to sell.

Example: Reynolds Pvt. Ltd. manufactures two brands of pen Light & Elite. The sales
department of the company has three departments in different regions of the country.
st
The sales budgets for the year ending 31 Dec, 2008 Light department I-3,00,000; department-II
5,62,500; departm ent III-1,80,000. Elite – department I-4,00,000; department II-6,00,000; department-
III-20,000.
Sales prices are 3 and 1.20 in all departments. It is estimated that by forced sales promotion
the sales of Elite in department I will increase by 1,75,000. It is also expected that by increasing
production and arranging extensive advertisement, department III will be enabled to increase
the sale of Elite by 50,000.
It is recognized that the estimated sales by department II represent and unsatisfactory target. It
is agreed to increase both estimates by 20%.
Prepare a sales budget for the year 2008.

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