2.2

• What is sales forecasting?

  A prediction of future sales volume
• What is one benefit of sales forecasting?

  It informs cash flows
• How does sales forecasting help in planning stock levels?

  It predicts future inventory needs
• Why is staffing level planning important in sales forecasting?

  It ensures adequate workforce for sales
• How does sales forecasting assist in promotional strategies?

  It decides when promotions are necessary
• What long-term strategy can sales forecasting help plan?

  Capacity planning for future needs
• What is one factor that affects sales forecasting?

  Consumer trends
• How do economic factors influence sales forecasting?

  They affect businesses and consumers' behavior
• Name an economic factor that affects sales forecasting.

  Interest rates
• What is a challenge in sales forecasting?

  Volatile consumer tastes
• Why is the range of data a difficulty in sales forecasting?

  It complicates accurate predictions
• How does subjective expert opinion affect sales forecasting?

  It introduces bias into predictions
• What is the formula for sales revenue?

  Price per unit × Quantity sold
• How is total costs calculated?

  Fixed costs + Variable costs
• What are fixed costs?

  Costs that do not change with output
• Give an example of a fixed cost.

  Rent
• What are variable costs?

  Costs that change with output level
• Give an example of a variable cost.

  Raw materials
• What are semi-variable costs?

  Costs with both fixed and variable components
• What is contribution in financial terms?

  The difference between selling price and variable cost
• How is contribution per unit calculated?

  Selling price - Variable cost per unit
• What is the break-even point?

  Where total revenue equals total costs
• What is the formula for break-even output?

  Fixed costs ÷ Contribution per unit
• What does a break-even chart represent?

  Graphical representation of costs and revenue
• What is the margin of safety?

  The difference between actual sales and break-even sales
• How is margin of safety calculated?

  Current output - Break-even output
• What is a limitation of break-even analysis?

  Assumes linear relationships
• Why does break-even analysis ignore changes in efficiency?

  It assumes constant production efficiency
• What is a sales budget?

  Projected sales revenue
• What does a production budget represent?

  Planned production levels
• What is a cash budget?

  Projected cash inflows and outflows
• What is a master budget?

  Comprehensive financial plan for the organization
• How is variance calculated?

  Actual figure - Budgeted figure
• What is a favorable variance?

  Actual performance better than budgeted
• What is an adverse variance?

  Actual performance worse than budgeted
• What is zero-based budgeting?

  Justifying all expenses for each budget period
• What are the types of budgets in financial planning?

  • Sales budget: Projected sales revenue
  • Production budget: Planned production levels
  • Cash budget: Projected cash inflows and outflows
  • Master budget: Comprehensive financial plan
• What are the limitations of break-even analysis?

  • Assumes linear relationships
  • Ignores changes in efficiency
  • Assumes all units produced are sold
• What are the benefits of sales forecasting?

  • Inform cash flows
  • Plan stock levels
  • Plan staffing levels
  • Plan promotional strategies
  • Plan long-term strategy
  • Ensure funding is in place