Question

Sales Budget Honolulu Shirt Shop has very seasonal sales. Assume that for next year management is...

Sales Budget
Honolulu Shirt Shop has very seasonal sales. Assume that for next year management is trying to decide whether to establish a sales budget based on average sales or on sales estimated by quarter. The unit sales for next year are expected to be 5% higher than current year sales. Unit shirt sales by quarter for this year were as follows:

Children's Women's Men's Total
Winter quarter 80 80 140 300
Spring quarter 180 120 160 460
Summer quarter 500 600 260 1,360
Fall quarter 120 160 160 440
Total 880 960 720 2,560


Children’s T-shirts sell for $10 each, women’s sell for $15, and men’s sell for $18.

Assuming a 5% increase in sales, prepare a sales budget for each quarter of the year using the following:

a. Average quarterly sales. (Hint: Winter quarter children’s shirts are 231 [880 X 1.05/4].)

Honolulu Shirt Shop
Sales Budget
Quarterly - Upcoming Year
Winter Spring Summer Fall Year Totals
Units:
Children's Answer Answer Answer Answer Answer
Women's Answer Answer Answer Answer Answer
Men's Answer Answer Answer Answer Answer
Dollars:
Children's Answer Answer Answer Answer Answer
Women's Answer Answer Answer Answer Answer
Men's Answer Answer Answer Answer Answer
Totals Answer Answer Answer Answer Answer


b. Actual quarterly sales. (Hint: Winter quarter children’s shirts are 84 [80 X 1.05].)

Honolulu Shirt Shop
Sales Budget
Quarterly - Upcoming Year
Winter Spring Summer Fall Year Totals
Units:
Children's Answer Answer Answer Answer Answer
Women's Answer Answer Answer Answer Answer
Men's Answer Answer Answer Answer Answer
Dollars:
Children's Answer Answer Answer Answer Answer
Women's Answer Answer Answer Answer Answer
Men's Answer Answer Answer Answer Answer
Totals Answer Answer Answer Answer Answer


c. Suggest advantages of each method.

Which one is not an advantage to preparing a sales budget using average quarterly sales.

Reduces the possibility of being out of stock in most quarters

Minimizes the investment in inventory during low-sales quarters

Smoothes the investment in inventory throughout the year

Simplifies the purchasing of inventory

Please answer all parts of the question.

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