Chapter 12
FORECASTING SALES AND COST OF SALES
In This Chapter
• EasyRefresher™: Sales and Cost of Sales Forecasting
• Using the Sales Forecasting Starter Workbook
• Understanding the Starter Workbook’s Calculations
• Customizing the Starter Workbook
Business planning usually requires detailed forecasts of sales and related variables, such
as cost of sales, gross margins, and the inventory levels required to support the fore-
casted sales. The sales forecasting starter workbook (SALESRPT.XLS) described in this
chapter provides a framework for you to use in forecasting sales, cost of sales, gross mar-
gins, and inventory levels in a variety of businesses, including manufacturing, wholesaling
and retailing, and service firms. This chapter shows how to use the sales forecasting starter
workbook , print it, modify it, and link it with subsidiary spreadsheets.
EasyRefresher™:
Sales and Cost of Sales Forecasting
Sales forecasting is basic to any business plan or budget and to some investment analysis.
Essentially, you need to collect information for or make forecasts concerning as many as five
related variables.
For example, you typically need to collect the units and dollars of inventory that you al-
ready hold or that you estimate you will hold at the beginning of the sales forecast. In a
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manufacturing firm, these amounts are the sum of the work in process, or partially manu-
factured, inventory and the finished goods, or ready to sell, inventory. In a wholesaling or
retailing firm, these amounts are the sum of those items purchased for resale. You need to
collect both the units of inventory and the dollars of inventory. (In a service business, no
inventory is manufactured or purchased, so these amounts are 0.)
Second, for each period in the forecasting horizon, you need to forecast the number of units
produced if you’re a manufacturer or the number of units purchased if you’re a wholesaler
or retailer. Typically, the amounts cannot be forecasted independent of sales, but s