Deck 12: Sales Forecasting and Developing Budgets

Question 1

A sales forecast is the key factor in all operational planning.

Answer 1

True

Question 2

NAICS is a system that forecasts sales for multinational companies.

Answer 2

False

Question 3

An example of the survey method of sales forecasting is the use of test markets.

Answer 3

False

Question 4

The number of secretaries is a basic market factor for desktop computer sales.

Question 5

A customer analysis determines who will buy the product,not who will use it.

Question 6

The sales forecast is independent of the marketing program.

Question 7

You cannot test market an industrial product.

Question 8

Market potential is the maximum market share that an individual firm can expect to achieve.

Question 9

Freight carloadings is a basic market factor underlying the sales of steel.

Question 10

Marketing goals must be established before a forecast can be made.

Question 11

The determination of sales forecasts is an iterative process.

Question 12

The sales forecast is usually the responsibility of the sales manager.

Question 13

Retailers are not willing to share their scanner data with suppliers.

Question 14

Test markets are a means of estimating a product's market potential.

Question 15

The sales forecast is derived from the sales budget.

Question 16

The use of regression analysis for forecasting sales always requires the existence of some sort of sales history.

Question 17

Sales potential is the total expected sales of a given product for the entire industry.

Question 18

A market index is a market factor expressed in a quantitative form relative to some base figure.

Question 19

The use of mathematical models is the most popular forecasting method.

Question 20

Questionnaire surveys are a good means of forecasting sales.

Question 21

Budgets require considerable executive time.

Question 22

A production budget should be formulated prior to making the sales budget.

Question 23

A sales history is not necessary for formulating a market derivation sales potential.

Question 24

The longer the revenue lag,the greater the pressure on the budget system.

Question 25

It is difficult to test market a product whose consumption cycle is long.

Question 26

The sales force composite can best be used when the sales force sells large items to relatively few buyers.

Question 27

"Sales of lite beer are forecasted to $150 million in 2007 in the United States," reported sales manager,Christi Feldman,to her boss.This statement is a:

A)Forecast of sales.
B)Forecast of market potential.
C)Forecast of sales potential.
D)Forecast of territory potential.
E)Forecast of market share.

Question 28

Competitive developments need not be considered in developing your sales forecast.

Question 29

The budget's main objective is to minimize costs.

Question 30

To say that "the market potential for snow skis in Colorado and Utah is 200,000 pairs" is not a correct way of stating market potential because:

A)The dollar sales figure is not stated.
B)The time period for these sales is not stated.
C)The geographic market is limited to only two states.
D)Nothing was said about maximum possible sales.
E)None of thesE.That is,the statement is correct as it stands.

Question 31

Firms desiring to closely control costs generally use short budgetary periods.

Question 32

The sales force composite method of forecasting sales is best used for industrial equipment.

Question 33

The budget's basic purpose is to keep costs and revenues in alignment.

Question 34

The market potential for a product may best be defined as:

A)Our expected company sales of that product during next year.
B)Our company's share of the market for that product.
C)Being synonymous with sales potential.
D)The expected total industry sales of the product in a given market during a stated period of time.
E)A market index.

Question 35

Errors in budgets tend to offset one another.

Question 36

The Delphi technique for forecasting is essentially based on census data.

Question 37

With the availability of computers to generate spreadsheets,it is now possible to make changes in one part of the budget and to see immediately the impact on all other parts of the budget.

Question 38

The cash flow budget cannot be developed until after the sales budgets and the various expense budgets are formulated.

Question 39

Most budgets overestimate expenses and underestimate revenues.

Question 40

A budget is usually based upon a sales forecast.

Question 41

Changes in planned marketing expenditures have an effect on which of the following:

A)Sales forecasts.
B)Sales potential.
C)Sales budgets and sales forecasts.
D)None of these.
E)All of these.

Question 42

If the market potential for beer is $100 million in Denver and Coor's share is 60 percent,what is Coor's sales forecast?

A)The sales forecast is $60 million.
B)The sales forecast should be something over $60 million.
C)There is not enough information to determine the sales forecast.
D)the sales forecast would be something over $60 million.
E)The sales forecast would be somewhat lower than $60 million.

Question 43

A major advantage of the test-market method of sales forecasting is that it:

A)Usually can be done quickly.
B)Usually can be done inexpensively.
C)Measures the market share under actual selling conditions.
D)Is a mathematically exact method of estimating potential.
E)Accurately measures future buying intentions of consumers.

Question 44

Which of the following best represents the market potential-sales potential relationship?

A)Eastman Kodak-cameras.
B)Camera-Polaroid.
C)Kodak-Instamatic.
D)Polaroid-Kodak.
E)Cameras-film.

Question 45

Regarding a strategic sales forecast:

A)It should be done within the broader context of strategic marketing planning.
B)It should guide strategic company planning because the sales force generates the company's revenues.
C)It is not related to strategic business unit (SBU)planning.
D)It usually follows the implementation activities in the management process.
E)None of these is correct.

Question 46

The correct terminology in demand forecasting may be illustrated by saying that the ______ for snow skis in the Midwest next year is 800,000 pairs,while the ______ for Head (brand)skis in that market is 100,000.

A)Market potential - sales potential (market share).
B)Sales potential - sales forecast.
C)Market share - sales potential.
D)Sales forecast - market potential.
E)None of these is correct.

Question 47

Which of the following forecasting methods is the most widely used?

A)Survey methods
B)Mathematical models
C)Test markets
D)Operational methods
E)None of these

Question 48

As a forecasting method,a "survey of buyer intentions" is most effective when:

A)There are many potential buyers.
B)We are looking for a very low-cost method.
C)We need the forecast by tomorrow.
D)A high percentage of "I-intend-to-buy" respondents are likely to actually buy the product.
E)Respondents do not yet know their intentions.

Question 49

Which of the following would be the best market factor for estimating the demand for sales management textbooks?

A)Number of sales executives.
B)Number of business school undergraduate students.
C)Number of marketing majors.
D)Buying power of college students.
E)Number of students enrolled in sales management courses.

Question 50

Scanner technology has:

A)Sales forecast are no longer needed because of scanner technology.
B)Scanner technology has not improved sales forecasts.
C)Manufacturers usually own the scanner technology that retailers use.
D)Scanner technology has enabled retailers to provide their suppliers with useful sales data.
E)None of these is true.

Question 51

Regarding the North American Industry Classification System:

A)It is used to forecast the sales of consumer products.
B)It classifies test markets according to their representativeness of certain types of consumers.
C)It can be used as a basis for developing a composite forecast.
D)It can be used as a basis for developing a market index.
E)None of these is true.

Question 52

The share of total lawnmower sales which Sears,Roebuck should get next year in the South Atlantic census region is that company's ______ for the product.

A)Market potential.
B)Sales budget.
C)Sales potential.
D)Market factor.
E)Sales quota.

Question 53

Forecasting sales is an iterative process involving the sales forecast and:

A)Marketing expenditures.
B)Market potential.
C)Production expenditures.
D)Accounting.
E)Sales potential.

Question 54

Which of the following methods of sales forecasting is least dependent on historical data?

A)Test marketing.
B)Trend analysis.
C)Correlation analysis.
D)Direct derivation.
E)Analysis of past sales.

Question 55

As a technique for determining market potential,a major strength of the market-factor-derivation method is that:

A)Many of the figures used in the computation are only estimates.
B)The level of validity is quite high.
C)It is too complex for the average sales manager to understand.
D)It is one of the more expensive methods.
E)It usually takes several months to complete the calculations.

Question 56

Which of the following statements are correct about test marketing?

A)Products being test marketed should be produced in large numbers to minimize production costs.
B)Test marketing involves observing sales results in one market and using the results to forecast sales in other markets or the whole market.
C)Products that take a long time to gain consumer awareness and usage are excellent candidates for test marketing.
D)While test marketing is a good sales forecasting technique,other techniques are more accurate.
E)None of these is correct statements about test marketing.

Question 57

One key difference between a company's sales forecast and this firm's sales potential is that:

A)The sales forecast is usually a larger figure.
B)The sales potential must be determined first.
C)The sales potential assumes that a certain strategic plan exists.
D)The sales forecast is an estimate of sales the firm expects to make under a proposed marketing plan.
E)The sales potential covers the company's entire market,while the forecast is made for individual market segments.

Question 58

Which of the following is an accurate generalization regarding test marketing as method of sales forecasting?

A)It tells us how many people intend to buy the product rather than who actually buys it.
B)It is not a good method to use for a new product.
C)This method takes a little time or money in comparison with the other methods.
D)If a product succeeds during its test marketing,it will be an automatic success when marketed on a full-scale basis.
E)None of these is correct.

Question 59

A company's ______ is the share of the market potential that this firm can expect to achieve.(We assume that the product market and time period have been stated. )

A)Sales forecast.
B)Sales quota.
C)Sales potential.
D)Marketing goal.
E)Market index.

Question 60

To use regression analysis effectively as a method for sales forecasting:

A)Management is limited to the use of two market factors.
B)An executive does not have to have any knowledge of statistics.
C)A lengthy sales history must be available.
D)Management should forecast only in test markets.
E)Management should not expect mathematical exactness in the results.

Question 61

Frank May,Vice President of Sales of Zapper Exterminators,is unhappy with the recent executive opinion forecasting session held in the company's headquarters.Frank's unhappiness is most likely due to:

A)The fact that Bob Fess,Vice President of Finance,dominated the discussion of forecasting sales of Zapper's new service.
B)Missing historical data which reduced the number of observations used in the forecast.
C)The inability of sales managers to motivate their salespeople to provide accurate estimates of sales in the forecast period.
D)The inability of the managers to correctly apply regression analysis to forecast sales.

Question 62

Accurate sales forecasts would be difficult to obtain for which of the following products?

A)Soft drinks.
B)Microwave ovens.
C)Commercial aircraft.
D)Virtual reality games.
E)Domestic automobiles.

Question 63

Which of the following factors can contribute to the risks in sales forecasting?

A)Uncertainty over future growth rate in the firm.
B)The lack of an adequate sales history in the firm.
C)The existence of a fashion element in the company's products.
D)All of these.
E)Only two of A-B-C above.

Question 64

A firm with a small sales force is selling expensive textile machinery to large textile mills.This seller is most likely to use the ______ method of sales forecasting.

A)Sales force composite.
B)Correlation analysis.
C)Trend analysis.
D)Test marketing.
E)Direct derivation.

Question 65

A company's sales forecast is likely to be less than its sales potential when:

A)Plant capacity is too small to produce as much as the potential.
B)The firm's distribution system is limited so the company cannot reach all its potential market.
C)Management is anxious to sell all the market will absorb.
D)Any or All of these occur.
E)Either A or B may be correct.

Question 66

Which of the following is likely to endanger the accuracy of a sales forecast made one year in advance?

A)A competitor's improved product makes our's technologically obsolete during that year.
B)A change in our company management resulted in changes in our strategic marketing plans during the year.
C)The consumers' buying psychology during the year fulfilled our predictions.
D)All of these contribute to inaccuracy.
E)Only two of A-B-C are likely to throw our forecast into error.

Question 67

Surveys of buyer's intentions:

A)Are easy to employ in markets where users are numerous.
B)Are based on information obtained directly from product users,whose later buying decision will actually determine the sales.
C)Are based on actual sales of the product.
D)Can be done quickly and inexpensively.
E)None of these is correct.

Question 68

An advantage of using the executive-opinion method of sales forecasting is that:

A)The salespeople are closest to the market situation.
B)It can be done quickly and easily.
C)It is highly accurate.
D)It is subject to statistical measures of validity.
E)None of these.

Question 69

Which of the following statements are false?

A)The sales potential of a company or product is typically lower than the company's sales forecast.
B)Market potential refers to forecasts for the industry as a whole,while a sales potential refers to forecasts for a particular company or product.
C)Sales potential can also be described as a market share.
D)A sales potential and a market potential typically are different.
E)None are false.

Question 70

Changes in which of the following may have an impact on sales forecasts:

A)Price structure.
B)Distribution channels.
C)Promotional plans.
D)Product design.
E)All of these.

Question 71

Wayne Rexburg,a marketing analyst for Bosco Incorporated,uses exponential smoothing techniques to forecast sales.If Wayne decides to increase the smoothing constant from 0.4 to 0.8,he is:

A)Decreasing the influence of sales in recent periods in the forecast,while increasing the influence of sales in earlier periods in the forecast.
B)Doubling the influence of forecasted sales in time t.
C)Increasing the influence of sales in recent periods in the forecast,while decreasing the influence of sales in earlier periods.
D)Damaging the integrity of the forecast because the smoothing constant should remain the same;its value is not arbitrary.
E)Enhancing the validity of the forecast because the influence of sales in recent periods - the most relevant periods - is increased while the influence of sales in past periods is decreased.

Question 72

A new firm with ten salespeople selling expensive navigational instruments to shipbuilders probably should use the ______ method of sales forecasting.

A)Trend analysis.
B)Sales force composite.
C)Test marketing.
D)Correlation analysis.
E)Any of the above is as good as another for this firm.

Question 73

Which of the following is true about sales forecasts?

A)Changes is marketing expenditures have no impact on the preparation of the sales forecast.
B)The sales forecasting process should be kept as simple as possible.
C)Salespeople should use the practice of "low balling" to insure that they have attainable quotas.
D)Overly optimistic sales forecast are not a problem.
E)Once the sales forecast has been set,it should not be altered.

Question 74

Salespeople:

A)Generally do not participate in the forecasting process.
B)Are often poor forecasters.
C)Tend to forecast high.
D)Are often good forecasters.
E)Tend to forecast low.

Question 75

For sales forecasting,the sales force composite method has the merit of:

A)Being useful in forecasting sales of convenience goods.
B)Using qualified people to do the forecasting job.
C)Placing responsibility on those who will have to meet the target.
D)Not taking sales representatives' time.
E)Being limited to the consumer market.

Question 76

The controlling factor in all budgeting and operational planning in a company is the:

A)Sales potential.
B)Sales quota.
C)Market potential.
D)Sales forecast.
E)Market share.

Question 77

Which of the following is the most subjective method of sales forecasting?

A)Trend analysis.
B)Test marketing.
C)Executive opinion.
D)Correlation analysis.
E)Direct derivation.

Question 78

The Delphi technique is used to:

A)Improve test market forecasts.
B)Improve the accuracy of a regression model.
C)Improve the accuracy of executive opinion forecasts.
D)More accurately predict consumer needs.
E)All of these.

Question 79

Which sales forecast is correct based on the regression model described below if the company decides to spend $10,000 on advertising:
Y = 70.5 + 3.0x
Where: y = unit sales in thousands
X = dollars spent on advertising on thousands
Where are forecasted unit sales?

A)100.5 units.
B)30,070.5 units.
C)73.5 units.
D)30.503 units.
E)1,000.5 units.

Question 80

A sales forecasting period of less than one year is usually imperative for a producer of:

A)Fashion clothing for teenagers.
B)Large office copy machines,like Xerox.
C)Peanuts in Georgia.
D)Television sets.
E)Breakfast cereals.