Honolulu Shirt Shop has very seasonal sales. Assume that for next year management is trying to decide whether to establish a sales budget based on average sales or on sales estimated by quarter. The unit sales for next year are expected to be 5% higher than current year sales. Unit shirt sales by quarter for this year were as follows:
| Children’s | Women’s | Men’s | Total | |
|---|---|---|---|---|
| Winter quarter | 80 | 80 | 140 | 300 |
| Spring quarter | 180 | 120 | 160 | 460 |
| Summer quarter | 500 | 600 | 260 | 1,360 |
| Fall quarter | 120 | 160 | 160 | 440 |
| Total | 880 | 960 | 720 | 2,560 |
Children’s T-shirts sell for $10 each, women’s sell for $15, and men’s sell for $18.
Assuming a 5% increase in sales, prepare a sales budget for each quarter of the year using the following:
a. Average quarterly sales. (Hint: Winter quarter children’s shirts are 231 [880 X 1.05/4].)
| Honolulu Shirt Shop Sales Budget Quarterly – Upcoming Year |
|||||
|---|---|---|---|---|---|
| Winter | Spring | Summer | Fall | Year Totals | |
| Units: | |||||
| Children’s | Answer | Answer | Answer | Answer | Answer |
| Women’s | Answer | Answer | Answer | Answer | Answer |
| Men’s | Answer | Answer | Answer | Answer | Answer |
| Dollars: | |||||
| Children’s | Answer | Answer | Answer | Answer | Answer |
| Women’s | Answer | Answer | Answer | Answer | Answer |
| Men’s | Answer | Answer | Answer | Answer | Answer |
| Totals | Answer | Answer | Answer | Answer | Answer |
b. Actual quarterly sales. (Hint: Winter quarter children’s shirts are 84 [80 X 1.05].)
| Honolulu Shirt Shop Sales Budget Quarterly – Upcoming Year |
|||||
|---|---|---|---|---|---|
| Winter | Spring | Summer | Fall | Year Totals | |
| Units: | |||||
| Children’s | Answer | Answer | Answer | Answer | Answer |
| Women’s | Answer | Answer | Answer | Answer | Answer |
| Men’s | Answer | Answer | Answer | Answer | Answer |
| Dollars: | |||||
| Children’s | Answer | Answer | Answer | Answer | Answer |
| Women’s | Answer | Answer | Answer | Answer | Answer |
| Men’s | Answer | Answer | Answer | Answer | Answer |
| Totals | Answer | Answer | Answer | Answer | Answer |
c. Suggest advantages of each method.
Which one is not an advantage to preparing a sales budget using average quarterly sales.
Reduces the possibility of being out of stock in most quarters
Minimizes the investment in inventory during low-sales quarters
Smoothes the investment in inventory throughout the year
Simplifies the purchasing of inventory
