Sales Budget

Problem No. 1.
Sales budget of last year was as under:
Particulars
Department A Department B Department C
Sales commission
15,000
12,000
14,000
Selling expenses
12,000
16,000
8,000
Wages of storage
14,000
15,000
13,000
Expenses of godown
8,000
9,000
6,000
Salary
7,000
8,000
5,000
Rent and taxes
3,000
4,000
3,000
Advertisement
4,000
5,000
2,000
Total
63,000
69,000
51,000
Expected change in current year will be as under:
1. Selling commission of each department will be increased by 5 %
2. Wages of storage of Department A and C will be increased by 3 %
3. Increase in salary Rs. 500, Rs. 600 and Rs. 400 respectively
4. Rent and taxes of each department will be increased by Rs. 1000
5. Advertisement expenses of department C will be increased by Rs. 1000
Prepare sales overhead budget for the current year.

Total
41,000
36,000
42,000
23,000
20,000
10,000
11,000
1,83,000

Solution:
Sales Overhead Budget
Particulars
A
B
C
Total
Sales commission
15,750
12,600
14,700
43,050
Selling expenses
12,000
16,000
8,000
36,000
Wages of storage
14,420
15,000
13,390
42,810
Expenses of godown
8,000
9,000
6,000
23,000
Salary
7,500
8,600
5,400
21,500
Rent and taxes
4,000
5,000
4,000
13,000
Advertisement
4,000
5,000
3,000
12,000
Total
65,670
71,200
54,490
1,91,360
In comparison to the last year selling overhead increased by Rs. (1,91,360 1,83,000) = Rs. 8,360
Sr. No.
1
2
3
4
5
6
7

Problem No. 2
JK Ltd. sells two products Jay and Kay in four areas- North, South, East and West. Budgeted sales for the
year ending 31.03.04 were as follows:
NorthJay 5000 units @ Rs. 30 each and Kay 3000 units @ Rs. 15 each
SouthKay 6000 units @ Rs. 15 each
East--- Jay 7500 unit @ Rs.30 each
WestJay 4000 units @ 30 each and Kay 2500 units @Rs. 15 each
Actual sales for the same period were as follows:
NorthJay 5750 units @ Rs. 30 each and Kay 3500 units @ Rs. 15 each
SouthKay 6250 units @ Rs. 15 each
East--- Jay 8250 unit @ Rs.30 each
WestJay 4750 units @ 30 each and Kay 2625 units @Rs. 15 each

On the basis of all the relevant factors, the following sales are budgeted for the year ending 31.03.05.
NorthJay 6000 units and Kay 3250 units
SouthKay 6500 units
East--- Jay 8500 units
WestJay 4500 units and Kay 2750 units
It was decided that additional advertising campaign will be undertaken in South and east which will result
in additional sales of 1500 units of Jay in South and 2500 units of Kay in East.
You are required to prepare a sales budget for the year ending 31.03.05 for presentation to management
also showing the budgeted and actual sales for the year ending 31.03.04 which are to be provided as a
guide in preparing the sales budget.
Solution:
Sales budget for the year ending 31.03.05

Produ
ct
Jay
Kay
Total
(1)
Jay
Kay
Total
(2)
Jay
Kay
Total
(3)
Jay
Kay
Total
(4)
Total
1+2+
3+4
Jay
Kay
Total

Budgeted March 05
Quantity Price Amt.

Budgeted March 04
Quantity Price Amt.

Actual March 04
Quantity Price Amt.

Area

6000
3250
9250

30
15

1,80,000
48,750
2,28,750

5000
3000
8000

30
15

1,50,000
45,000
1,95,000

5750
3500
9250

30
15

1,72,500 North
52,500
2,25,000

1500
6500
8000

30
15

45,000
97,500
1,42,500

--6000
6000

-15

-90,000
90,000

-6250
6250

-15

-- South
93,750
93,750

8500
2500
11000

30
15

2,55,000
37,500
2,92,500

7500
-7500

30
--

2,25,000
-2,25,000

8250
-8250

30
--

2,47,500 East
-2,47,500

4500
2750
7250

30
15

1,35,000
41,250
1,76,250

4000
2500
6500

30
15

1,20,000
37,500
2,57,500

4750
2625
7375

30
15

1,42,500 West
39,375
1,81,875

20500
15000
35500

30
15

6,15,000
2,25,000
8,40,000

16500
11500
28,000

30
15

4,95,000
1,72,500
6,67,500

18750
12375
31,125

30
15

5,62,500
1,85,625
7,48,125

Production Budget
Problem No.3
A manufacturing company submits the following figure to product X for the first quarter 2006.
Sales target:
January
60,000 units
February
48,000 units

March
72,000 units
Stock position: 1st January 50% of respective months sales
31st March 40,000 units
End of January and February 50% of subsequent months sales
You are required to prepare production budget for the first quarter of 2006.
Solution:
Sr. No.
1

Sign
+
-

Production budget for the 1st quarter of 2006

Particulars
January
February
Targeted sales
60,000
48,000
Closing stock *
24,000
36,000
84,000
84,000
Opening stock (50% of sales)
30,000
24,000
Production in units
54,000
60,000

March
72,000
40,000
1,12,000
36,000
76,000

* January 50 % of 48,000, February 50 % of 72,000

Problem No. 4
From the following details in units, prepare production budget for the year 2006 assuming sales as
limiting factor:
Product group A
Opening stock
Budgeted sales
X
50,000 units
2,00,000 units
Y
60,000
2,50,000
Z
1,00,000
5,00,000
Product group B
P
10,000
1,00,000
Q
20,000
50,000
Stock of Y and Z is to be maintained at 10% above the existing level to sustain the budgeted sales. Stock
level of X may be reduced by 20%. Stock of Q is proposed to be raised by 30,000 units for export market
not considered in sales budget given above.
Solution:
Production budget for the year ended 31.03.06
Particulars
Product group A
Product group B
X
Y
Z
P
Q
Units required to meet sales
2,00,000
2,50,000
5,00,000
1,00,000
50,000
budget
+ desired closing stock *
40,000
66,000
1,10,000
10,000
50,000
2,40,000
3,16,000
6,10,000
1,10,000
1,00,000
- Opening stock
50,000
60,000
1,00,000
10,000
20,000
Planned production units
1,90,000
2,56,000
5,10,000
1,00,000
80,000
*
50,000
60,000
1,00,000
10,000
20,000
(- 20%)
(+ 10%)
( + 10%)
--+ 30,000
10,000
6,000
10,000
40,000
66,000
1,10,000
10,000
50,000
Only for private circulation
Dr. J K Nandi.