This preview shows page 1. Sign up to view the full content.
Unformatted text preview: ts 100 units
at $10 each for the month. In the second case, when the forecast is price x units, as soon as you know
the price is going up, you also know that the resulting sales should also increase. Thinking of the
forecast in components is easier.
The illustration below shows the ﬁrst part of a units-based sales forecast. It takes assumptions for
sales in units, then the assumed average prices, and multiplies them to calculate sales dollar values. UNITS-BASED SALES FORECAST The sales forecast multiplies unit forecasts by per-unit prices to calculate projected sales. Cost of Sales
Cost of sales, sometimes called Cost of Goods Sold (COGS) or direct costs, is traditionally the
costs of materials and production of the goods a business sells. Cost of Sales or COGS belongs in
accounting in the month in which the goods or services are actually sold, regardless of when they
For a manufacturing company this is materials, labor, and factory overhead. For a retail shop it would
be what it pays to buy the goods that it sells to its customers. For service businesses, that don’t sell
goods, the same concept is normally called “cost of sales,” which shouldn’t be confused with “sales and
marketing expenses.” The cost of sales in this case is directly analogous to cost of goods sold. For a
consulting company, for example, the cost of sales would be the remuneration paid to the consultants
plus costs of research, photocopying, and production of reports and presentations.
The illustration on the following page shows how a second part of the same forecast makes
assumptions for unit costs and uses them, along with unit sales assumptions above, to calculate direct
cost of sales. CHAPTER 11: FORECAST YOUR SALES 11.3 UNITS-BASED COSTS OF SALES The sales forecast multiplies unit forecasts by unit cost forecasts to calculate projected cost of sales.
This example shows two months of a forecast that actually includes 12 months and then annual
projections for a two-year period. The ﬁrst year column totals the sales of the ﬁrst 12 months. Graphics...
View Full Document
This note was uploaded on 01/26/2014 for the course BUINESS 102 taught by Professor Unknown during the Winter '09 term at University of Phoenix.
- Winter '09