Sales Forecast and the Master Budget It is December again and you know your supervisor is going to start asking you to work on the annual budget. It is such a pain to try to accumulate all of the numbers he is requesting, and you don't understand why he is so picky about the whole process. Begrudgingly you begin putting together the seemingly endless spreadsheets, and accounting documents he is asking for but why? How can what feels like a waste of time beso important to the company? The master budget contains multiple components, so let's take a look at each one of them individually first then we will start putting the pieces together What would you as a manager. think is the most important number to know. before you start any budgeting processz If you answered sales, you are right! We can't do anything from a budgeting standpoint until we have the sales forecast as a beginning number. We are going to call this forecast, the sales budget and it is the first plece of a somewhat large puzzle Having accurate sales figures is the key to the entire budgeting process. If this budget is inaccurate, it kind of rolls downhill and the rest of the budgets will be off as well in big companies, there might be mathematical models and statistics involved in figuring out these numbers. Don't worry. We won't be doing that in this course, but knowing the importance of this information is the key. This budget will affect the variable portions of the selling and administrative budgets and will also feed into the production budget. The production budget is needed to figure out direct materials, direct labor and manufacturing overhead budgets. Once these are all done, then comes the finished goods Inventory budget. Once all of these budgets are done, we can do a cash budget. Income statement and balance sheet to finish off the process. Information from all of the previous budgets into creating the cash budget so you can see the importance of an effective and accurate sales budget! So let's get started with our Sales Budget Our company Service Shoe Company makes the best running shoe ever. They have tasked you with creating a sales budget for the shoe. Let's start with some basic assumption, so we can start to build a budget. Service plans to sell 2.000 pairs of shoes this year. The selling price of the shoes is $100 per pale. For simplieky, we are going to assume that all of the sales are cash sales, and that sales is even each quarter. So armed with that information, here is the sales budget for Service Shoe Company! Complete the following and answer below question? What is the estimated sales for Q4? Sales Budget 10 29 30 Annual Total Budgeted Unit Sales Price Estimated Sales 49 $50.000 O $200.000 60.000 None of these