Sales budget

Definition

A sales budget is an estimate of expected sales revenue and the number of units that will be sold for a specific period. It serves as the starting point for preparing other types of budgets within an organization.

5 Must Know Facts For Your Next Test

1. The sales budget provides the foundation for other operating budgets such as production, purchasing, and labor budgets.
2. It typically includes both the quantity of units expected to be sold and the expected selling price per unit.
3. Preparation of a sales budget often involves analyzing historical sales data, market trends, and economic conditions.
4. Accurate sales budgeting is crucial for effective cash flow management and financial planning.
5. Variance analysis can be used to compare actual sales figures against the budgeted figures to assess performance.

Review Questions

• What are the primary components included in a sales budget?
• Why is the sales budget considered the cornerstone of other operating budgets?
• How does variance analysis relate to a sales budget?

Related terms

Operating Budget: A detailed projection of all estimated income and expenses based on forecasted revenues during a specific period.

Production Budget: A financial plan that estimates the number of units that must be produced to meet anticipated sales demand.

Cash Flow Budget: A projection of an organization's cash inflows and outflows over a particular period, derived from various operating budgets including the sales budget.