will have to revise their budget plan. The company recently purchased equipment intended to increase productivity; however, in doing so, they have added expenses related to paying back of the loan for the equipment. The loan makes up 5% of the company's total expenditures for the year. There are potential budgeting solutions that could be made in response to a decrease in sales. The budgets that are involved in this solution are the sales budget, the production budget and the direct materials budget[ CITATION Jam16 l 1033 ]. .
Barney and Co. have chosen to fix the need to increase unit sales by implementing a marketing campaign. The marketing team has put together a promotional incentive and has gained approval to roll it out to the sales team starting Quarter 1. The marketing campaign will be implemented to respond to the identified need to increase unit sales and fits into the plan related to the selling and administrative budget.
The sales budget contains an itemization of a company's sales expectations for the budget period, in both units and dollars. If a company has a large number of products, it usually aggregates its expected sales into a smaller number of product categories or geographic regions; otherwise, it becomes too difficult to generate sales estimates for this budget. The sales budget is usually presented in either a monthly or quarterly format; presenting only annual sales information is too aggregated, and so provides little actionable information [ CITATION Sal16 l 1033 ].
The first step in the budget process involves preparation of sales forecasts and development of a sales budget. This budget comes first because other budgets cannot be prepared without an estimate of sales. For example, managers preparing the production budget must have an estimate of future sales before they can determine what level of production will be necessary to meet demand [ CITATION Jam16 l 1033 ].