Question

how do businesses use sales budget ?

Answer 1

Solution:

A sales budget is a Future plan of sales volume and revenue for a certain period of time (Month, quarter, Year). Its basic components are number of units to be sold, selling price per unit, and total sales. The sales budget used to prepare other business budgets, and identifying needed process improvements and determining price increases.

Sale budget is used to prepare production budget, material purchase budget as from budgeted sales quantity budgeted production is identified on the basis of desired ending inventory to be maintained. Further on the basis of production budget, required of material is identified and according to which material purchase budget is prepared.

Sale budget is used as a bechmark of actual results. After completion of year actual number are compared with budgeted number and performance is evaluated on the basis of variance analysis.