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Projected sales, budgeting, flexible vs static budget

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1. Projected Sales is a budgeting technique to help companies project the budget for a future term. What happens if this figure is significantly wrong? How does a company determine if this figure is accurate? What other budgets depend on the accuracy of this number? Why?

2. What is the difference between a flexible and static budget? When should a company employ one of these specific types of budget? Is there a benefit in being so specific in the budgeting process? What are the benefits of this type of budgeting? In your opinion, what are the drawbacks of not using these types of budgets? Give an example to support your response.

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Your tutorial is 404 words and explains these issues in everyday language suitable for a novice.

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1. Projected Sales is a budgeting technique to help companies project the budget for a future term. What happens if this figure is significantly wrong?

If you project too high, you have excess unsold inventory. If you project low, you end up out of stock.

How does a company determine if this figure is accurate?

There is no magic way to know this. Sales estimates are just that - estimates. They find out how accurate the estimated sales budget is when the actual sales occur.

What other budgets depend on the accuracy of this number? Why?

All of the other budgets are typically dependent on the sales budget. The sales drive the production budget. The production budget drives the materials, labor and overhead needed. The sales, admin and operating expenses, with a ...

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