2.2.1 sales forecasting, 2.2.2 sales revenue and costs

what is a sale forecast and its purpose

• prediction of future sales volumes and trends

• purpose: predict help set budgets, identify when promotional activity is needed, plan work forces needed for sales team, stock management

factors affecting sales forecasts

• consumer trends: fashion, hopping habits, demographics

• economic variables: interest rate, employment, stage in economic cycle

• actions of competitors: competitors entering and exiting the market, changes in price, competitor is. better able to respond to consumer trends

difficulties in sales forecasting

• future is. unknown so its uncertain

• changing external environment

• unpredictable events

what is sales volume

• the amount of sales expressed as a number of units sold

• calculated as sales revenue / selling price

what is sales revenue

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

• calculated as selling price x sales volume

fixed, variable and total costs

• fixed costs: stays the same regardless of output. shown as straight horizontal lines on graphs

• variable costs: change in relation to number of items produced, calculated as average variable costs x number of units

• total costs: fixed costs + total variable costs