9. You are the sales manager responsible for achieving your companys sales budget. You are askedto estimate sales for next year as the starting point in the companys budget process. Last yearssales were $12 million and you know that the board of directors is looking for an annual increase of10% at constant selling prices. You know that this sales increase will be difficult to achieve withoutdropping prices due to intense competition. Your annual performance bonus is based on 2% of salesup to the agreed budget level and 5% of sales over and above the agreed budget. Plan how you mightapproach your meeting with the managing director to discuss your sales budget for next year.

10. You are the accountant for the company described in question 9 above. How would you advise the managing director in relation to his negotiations with the sales manager over next years budget?

E7.1 A companys annual sales budget is for 120 000 units spread equally through the year. It needs tohave one-and-a-half months inventory at the end of each month. Each unit purchased costs $15and is sold for $25. If opening inventory is 12 000 units, calculate the budgeted cost of purchases inthe first month of the budget year.