sales volume , revnue and costs

Sales forecasts

Prediction of future sales volume and revenue on past sales data and market research

Allows to make decisions on

• finance- see when cash inflows are coming into business and when they need to generate more cash to prevent running out

• Marketing- use different methods to encourage sales , if sales are down then make launch a new promotional campaign to boost sales

• Resources- how much of a product a firm sells affects how much resources needed , more demand = more raw materials

Factors affecting sales forecasting

• consumer trends - sometimes fairly predictable but sometimes uncertain

• Economic variables - affect Howe much money consumers have and how much they willing to buy of one product

• Actions of competitors- e.g of competitord decreases prices or launches new product

Sales volume

Number of units sold in a given time period

Sales revenue

The values of sales in a given time period

Amount of money generated before any deductions made

Sales revenue- selling price X sales volume

Costs

Fixed costs- dont change with output - e.g rent on factory , business rates , senior managers basic salaries

Variable costs - rise and fall as output changes- e.g hourly wages, raw materials costs and packaging costs

Total variable costs formula

Average variable cost X quantity prodcued

Total costs formula

Fixed costs + variable costs

Profit

Difference between revenue and costs

Total revenue- costs

If revenue is greater than costs then business will generate profit