2.2

Question 1

what is sales forecasting

Answer 1

predicting future sales volume and trends

Question 2

what are the purposes of sales forecasting

Answer 2

predicting:
-finance eg cash flow, budgets etc
-marketing
-labour eg sales team, seasonal staff
-resource management eg output, stock management

Question 3

what factors affect sales forecasts

Answer 3

-consumer trends + demographics
-economic variables
-actions of competitors

Question 4

how may economic variables affect sales forecatsing

Answer 4

-interest rates
-employment
-consumer confident
-economic cycle

Question 5

how may actions of competitiors affect sales forecasting

Answer 5

-entering/ leaving market
-price/ promotion change
-competitor is more flexible

Question 6

what are the difficulties of sales forecasting

Answer 6

-changing external environment
-unpredictable events
-time frame
-past may not indicate future
-lack of perfect information

Question 7

what is sales revenue

Answer 7

-amount of sales expressed as the total sum of money spent by consumers

Question 8

how is sales revenue calculated

Answer 8

selling price x quantity

Question 9

what is sales volume

Answer 9

amount of sales expressed as a number of units sold

Question 10

how can sales volume be calculated

Answer 10

-sales revenue / sell price

Question 11

what are costs

Answer 11

the expenses incurred by a firm in producing and selling its products eg wages or raw material

Question 12

what are the two types of cost

Answer 12

fixed
variable

Question 13

what are fixed costs

Answer 13

-costs that stay the same regardless of output eg rent

Question 14

what are variable costs

Answer 14

costs that change in relation to output eg raw materials

Question 15

how is total variable costs calculated

Answer 15

average variable cost x quantity

Question 16

how is total costs calculated

Answer 16

fixed costs + total variable costs

Question 17

how is profit calculated

Answer 17

total revenue - total costs

Question 18

how is revenue presented on a graph

Answer 18

diagonal line from 0

Question 19

how are fixed costs shown on a graph

Answer 19

a straight horizontal line

Question 20

how are variable costs shown on a graph

Answer 20

a diagonal line from 0

Question 21

how are total costs shown on a graph

Answer 21

diagonal line parallel to variable costs, begins at fixed cost line

Question 22

what is break even

Answer 22

the point at which a business is not making a profit or a loss; total revenue = total costs

Question 23

what is break even output

Answer 23

number of items a business must sell to reach break even

Question 24

what is contribution per unit

Answer 24

difference between selling price and variable costs- how much a product contributes

Question 25

how is contribution per unit calculated

Answer 25

sell price - variable cost

Question 26

how is total contribution calculated

Answer 26

contribution per unit x quantity sold

Question 27

how is break even calculated

Answer 27

fixed costs / contribution per unit (sp-vc)

Question 28

how is margin of safety calculated

Answer 28

actual output - break even output

Question 29

what factors may change break even

Answer 29

-fixed costs may change -variable costs may change -selling price may change

Question 30

pros of break even analysis

Answer 30

-calculate minimum sales needed for profit -calculate different level of profit/ loss at different outputs -predict the outcome of changing variables -provide target -part of business plan -help decision making

Question 31

cons of break even analysis

Answer 31

-based on predicted cost/ revenue -even fixed costs can vary -doesnt ensure sales, only identifies how many needed

Question 32

what are budgets

Answer 32

-forecasts for the future finances of a business -can be for departments or business as a whole

Question 33

what are the purposes of setting budgets

Answer 33

-provide target -helps with planning + forecasting -motivates budget holders due to increased responsibility

Question 34

what can budgets be set for

Answer 34

-income -expenditure -profit

Question 35

what is budgeting for income

Answer 35

-setting a target for the amount of revenue to be achieved in a time period -may be translated to individual staff targets

Question 36

what is budgeting for expenditure

Answer 36

-a limit placed on the amount of money to be spent in a given time period -informs predicted outflows -monitors over/ under spending

Question 37

what is budgeting for profit

Answer 37

-a target set for the amount of profit in a given period of time

Question 38

what are the types of budgets

Answer 38

-historical figures -zero based -incremental

Question 39

what is a historical figures budget

Answer 39

-a budget set based on previous years budgets -adjusted in line with actual outcomes

Question 40

what is a zero based budget

Answer 40

-setting a budget of zero, all departments have to justify requests for spending to get it approved -time consuming but flexible

Question 41

what is an incremental budget

Answer 41

setting a budget based off actual performance with a % added

Question 42

what is a variance

Answer 42

difference between actual income, expenditure, profit and the budgeted figure

Question 43

what is a favourable variance

Answer 43

a variance that benefits the business

Question 44

what is an adverse variance

Answer 44

a variance that is bad for the business

Question 45

what happens after a variance is identified

Answer 45

-identify causes -consider effect -look for solution

Question 46

what factors may cause a variance

Answer 46

-internal inefficiency -action of competitors -internal decision making -action of suppliers -changes in the economy

Question 47

how may internal inefficiency cause a variance

Answer 47

-poor management of budget -demotivated sales tesm

Question 48

how may actions of competitors cause variance

Answer 48

-lower prices -introduce new product -close store

Question 49

how may internal decision making cause variance

Answer 49

-change suppliers -special promotions

Question 50

how may actions of suppliers cause variance

Answer 50

-change prices -offer discount

Question 51

how may changes in the economy cause variance

Answer 51

-changing interest rates -minimum wage change

Question 52

how can a variance be responded to

Answer 52

-change budgets -staff training -reward staff -change suppliers -reallocate budgets -new marketing tactics -review product portfolio

Question 53

what are the difficulties of budgeting

Answer 53

-predictions -costs may change -actions of competitors unknown -managers may lack experience w budgets -time consuming to make and manage