Page 196 - DMGT403_ACCOUNTING_FOR_MANAGERS

Unit 9: Budgetary Control

Solution: Notes
Sales budget should be prepared to the tune of various influences of forthcoming seasons’ sales.
The expected increase or decrease in the sales volume should be incorporated at the time of
preparing the sales budget from the yester periods sale figures.
1. There is no change in the volume of existing sales of the department of I Light; the existing
sales of the department I of the Light should be retained as it is for the computation of the
budgeted figures, but there is a change expected to occur in the existing volume of sales of
the department I of the Elite. The change expected amounted to increase 1,75,000 units in
addition to the volume of existing sales i.e. the total volume of sales is equivalent to
4,00,000 units of existing volume of sales + 1,75,000 units expectation of increase= 5,75,000
units for Elite Department I.
2. In the II department of both Light & Elite expected to have an increase on the volume of
existing sales amounted is 20% i.e. 20% increase on the Department II of Light 5,62,500
units amounted 6,75,000 units and similarly in the case of Department II of Elite 6,00,000
units amounted 7,20,000 units.
3. In the III department of Light does not have any change in the volume of existing sales, it
means that 1,80,000 units has to be retained as it is in the computation of the budgeted
figure but in the case of Elite, department III expected to have an increase in the volume of
sales which amounted 20,000 units i.e. 70,000 units.
Sales Budget for the Year 2008
Light 3 Elite 1.20 Total
Selling Price
Quantity Quantity
Department I 3,00,000 9,00,000 5,75,000 6,90,000 15,90,000
Department II 6,75,000 20,25,000 7,20,000 8,64,000 28,89,000
Department III 1,80,000 5,40,000 70,000 84,000 6,24,000
11,55,000 4,65,000 13,65,000 16,38,000 51,03,000

Sales Overhead Budget

It is one of the important sub functional budgets, prepared by the sales manager who is responsible
for the sales volume of the enterprise to increase through various devices/tools of sales
promotion.
The sales overhead can be classified into two categories viz fixed sales overhead and variable
sales overhead.
What is meant by the Fixed Sales Overhead?
Fixed sales overhead is the expenses incurred for promoting the sales, which remains the same
or fixed irrespective of the volume of the sales.

Example: 1. Salaries to Sales Department
2. Salaries to the Administrative Staff

3. Salary to Salesmen
Variable sales overhead is the expenses incurred for the promotion of the sales, which is varying
along with the volume of sales of the firm.

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