Question

Sales Budget Assume that Stillwater Designs produces two automotive subwoofers: S12L7 and S12L5. The S12L7 sells for $475, and the S12L5 sells for $300. Projected sales (number of speakers) for the coming five quarters are as follows:

$12L7 $12L5
First quarter, 20Y1 800 1,300
Second quarter, 20Y1 2,200 1,400
Third quarter, 20Y1 5,600 5,300
Fourth quarter, 20Y1 4,600 3,900
First quarter, 20Y2 900 1,200
The vice president of sales believes that the projected sales are realistic and can be achieved by the company.
Required:
1. Prepare a sales budget for each quarter of 20Y1 and for the year in total. Show sales by product and in total for each time period. Do not include a multiplication symbol as part of your answer.
Stillwater Designs
Sales Budget
For the Year Ended December 31, 20Y1
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Total
$12L7:
Units
Price
Sales
$12L5:
Units
Price
Sales
Total sales
How will Stillwater Designs use this sales budget?
1. Stillwater Designs will use the sales budget in planning as the basis for the production budget.
2. The company can also compare actual sales against the budget to see if expectations were achieved.
3. Both 1 and 2.
4. None of the above.

Answer 1

1) Stillwater Designs

Sales Budget

For the year ended December 31, 20y1

Q1Y1 Q2Y1 Q3Y1 Q4Y1 Total

S12L7:

Units sold 800 2,200 5,600 4,600 13,200

Unit price $475 $475 $475 $475 $475

Revenue $380,000 $1,045,000 $2,660,000 $2,185,000 $6,270,000

S12L5:

Units sold 1,300 1,400 5,300 3,900 11,900

Unit price $300 $300 $300 $300 $300

Revenue $390,000 $420,000 $1,590,000 $1,170,000 $3,570,000

Total $770,000 $1,465,000 $4,250,000 $3,355,000 $9,840,000

sales

2) How will Stillwater Designs use this sales budget?

3. Both 1 and 2.

• 1. Stillwater Designs will use the sales budget in planning as the basis for the production budget.
• 2. The company can also compare actual sales against the budget to see if expectations were achieved.

A sales budget serves two basic purposes:

1. It serves as a planning tool in order to prepare a production budget and a cash collections budget.
2. It also serves as a control tool since management can use them to control the performance of different diversions, e.g. obviously it sets the goals for marketing and sales division, but it is also useful when controlling perceived product quality.