Honolulu Shirt Shop has very seasonal sales. Assume that for next year management is trying to decide whether to establish a sales budget based on average sales or on sales estimated by quarter. The unit sales for next year are expected to be 5% higher than current year sales. Unit shirt sales by quarter for this year were as follows:

	Children's	Women's	Men's	Total
Winter quarter	80	80	140	300
Spring quarter	180	120	160	460
Summer quarter	500	600	260	1,360
Fall quarter	120	160	160	440
Total	880	960	720	2,560

Children’s T-shirts sell for $10 each, women’s sell for $15, and men’s sell for $18.

Assuming a 5% increase in sales, prepare a sales budget for each quarter of the year using the following:

a. Average quarterly sales. (Hint: Winter quarter children’s shirts are 231 [880 X 1.05/4].)

	Honolulu Shirt Shop Sales Budget Quarterly - Upcoming Year
	Winter	Spring	Summer	Fall	Year Totals
Units:
Children's	Answer	Answer	Answer	Answer	Answer
Women's	Answer	Answer	Answer	Answer	Answer
Men's	Answer	Answer	Answer	Answer	Answer
Dollars:
Children's	Answer	Answer	Answer	Answer	Answer
Women's	Answer	Answer	Answer	Answer	Answer
Men's	Answer	Answer	Answer	Answer	Answer
Totals	Answer	Answer	Answer	Answer	Answer

b. Actual quarterly sales. (Hint: Winter quarter children’s shirts are 84 [80 X 1.05].)

	Honolulu Shirt Shop Sales Budget Quarterly - Upcoming Year
	Winter	Spring	Summer	Fall	Year Totals
Units:
Children's	Answer	Answer	Answer	Answer	Answer
Women's	Answer	Answer	Answer	Answer	Answer
Men's	Answer	Answer	Answer	Answer	Answer
Dollars:
Children's	Answer	Answer	Answer	Answer	Answer
Women's	Answer	Answer	Answer	Answer	Answer
Men's	Answer	Answer	Answer	Answer	Answer
Totals	Answer	Answer	Answer	Answer	Answer

c. Suggest advantages of each method.

Which one is not an advantage to preparing a sales budget using average quarterly sales.

Reduces the possibility of being out of stock in most quarters

Minimizes the investment in inventory during low-sales quarters

Smoothes the investment in inventory throughout the year

Simplifies the purchasing of inventory