Seabridge Distributors Inc. is a distributor of central air conditioners, purifiers, humidifiers, and dehumidifiers. It has the franchise for the distribution, installation, and servicing of products for a well-known national brand in eastern Canada. In September 2013, Louise Lane, president of the company, asked Bill Vance, general sales manager, to prepare a monthly sales budget for 2014. Lane informed Vance of the importance of a sales budget, giving the following reasons:
1. It helps to set goals for each sales representative and for individual product lines.
2. Manufacturers are told at least six months ahead of time of Seabridge’s short-term needs for each product line; this ensures Seabridge receives products in the right quantities at the right time.
3. The bank manager is told of Seabridge’s financial needs for each month of the budget year; the bank provides Seabridge with short-term money to finance the company’s inventories and is interested in its short-term repayment ability.
4. If Seabridge is to operate effectively, it should not be caught short of products at times when demand is high. Similarly, it would be costly to be left with excessive stock in inventory at the end of a season.
Following this meeting, Bill Vance decided to have a meeting with his four area managers to get the ball rolling. In early October, Bill met with his managers, emphasizing the importance of sound sales budgeting and stressing that the foundation for the preparation of a sound sales budget is sales forecasting.
The four sales managers had sales territories with the following number of sales representatives.
Territory Number of Sales Representatives
North .............. 4
South .............. 5
East ................ 3
West ............... 4
Total ................ 16
At the meeting, Vance presented some PowerPoint slides showing the industry’s demand projections for each product line, the company’s 2013 share of market, and what he hoped to achieve in 2014. The figures are shown below.

He also gave the following percentage breakdown of the number of units sold each month for different products based on the previous five years.

The average unit selling prices budgeted are as follows:
Air conditioners ..........$4,700
Air purifiers ............. 650
Air humidifiers ........... 515
Air dehumidifiers .......... 450
At the end of the meeting, the idea of sales objectives was discussed with the area managers. Although the company had not yet set goals for every sales representative, they agreed to set goals to help the company increase its share of the market for 2014.

1. Using the information available, prepare a monthly sales budget for 2014 for individual and combined product lines.
2. Is there anything wrong with the way that the sales budget and sales objectives were introduced in this company? How would you have approached thesituation?

  • CreatedDecember 03, 2014
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