Deck 5: Sales Forecasting and Budgeting

Question 1

A sales forecast precedes ___________________ for the year ahead.

A) production scheduling
B) inventory requirements
C) financial planning
D) all of the above

Answer 1

all of the above

Question 2

A quantitative estimate, in either physical or monetary units, of the total sales for a product within a market refers to ___________.

A) sales potential
B) sales forecast
C) market potential
D) quota

Answer 2

market potential

Question 3

___________refers to the portion of market potential that one among a set of competing firms can reasonably expect to obtain.

A) market potential
B) sales forecast
C) sales potential
D) quota

Answer 3

sales potential

Question 4

___________ refers to the sales goals for different sales territories and individual salespeople.

A) market potential
B) sales forecast
C) sales potential
D) quota

Question 5

___________ refers to prediction of the future market potential for a specific product.

A) market potential
B) sales forecast
C) sales potential
D) quota

Question 6

A sales forecast that is too low can lead to all but which of the below?

A) cash shortage
B) inadequate promotion to reach market
C) overstock
D) price increases to allocate scarce products

Question 7

A sales forecast that is too low can lead to all but which of the below?

A) too few salespeople, market not covered
B) idle cash
C) inadequate output to meet customer demand and lower total profits
D) unsatisfactory customer relations due to out-of-stock products

Question 8

A sales forecast that is too high can lead to all but which of the below?

A) excess output, unsold products
B) idle cash
C) price increases to allocate scarce products
D) overstock

Question 9

A sales forecast that is too high can lead to all but which of the below?

A) too few salespeople, market not covered
B) wasted promotion expenditures
C) overstock
D) reductions to sell excess products

Question 10

___________ refers to events that are conceivable, but less likely than those based directly on the forecast.

A) market potential
B) contingency
C) sales and operational planning process
D) sales potential

Question 11

___________ refers to an organized process that uses sales inputs to forecast business for upcoming periods of varying length.

A) market potential
B) sales forecast
C) sales potential
D) sales and operational planning process

Question 12

Manufacturing, marketing, procurement, customer service, and sales all improve with an effective sales and operational planning process. The following are characteristics of successful sales and operational planning programs except:

A) people
B) process
C) mission
D) technology

Question 13

Manufacturing, marketing, procurement, customer service, and sales all improve with an effective sales and operational planning process. The following are characteristics of successful S&OP programs except:

A) strategy
B) intent
C) process
D) performance

Question 14

________ is a uniform numbering system for categorizing nearly all industries according to their particular product or operation.

A) North American Industrial Classification System
B) North American Product Classification System
C) Standard Industrial Classification
D) none of the above

Question 15

A system for categorizing firms, formally adopted beginning with the 2002 Economic Census and the publication of the 2002 U.S. NAICS Manual refers to the ____________.

A) North American Industrial Classification System
B) North American Product Classification System
C) Standard Industrial Classification
D) none of the above

Question 16

__________ is a system for categorizing consumer products and service industries.

A) North American Industrial Classification System
B) North American Product Classification System
C) Standard Industrial Classification
D) none of the above

Question 17

The "buying power index" for a geographic area is a weighted combination of the area's

A) GNP, personal income
B) personal income, retail sales, population
C) inflation rate, personal income
D) retail sales, GNP

Question 18

The most widely used approach to estimating industrial demand uses information provided by

A) Moody's
B) Standard Industrial Classification Manual
C) Dun and Bradstreet
D) Standard & Poor

Question 19

A way of developing forecasts based on general economic conditions, typically projected gross national product (GNP) in constant dollars along with projections of consumer and wholesale price indexes, interest rates, unemployment levels, and federal government expenditures is known as __________.

A) top-down approach
B) breakdown approach
C) bottom-up approach
D) build-up approach

Question 20

A way of developing forecasts based on primary research, new data collected for the specific purpose at hand is called the ________.

A) top-down approach
B) breakdown approach
C) bottom-up approach
D) build-up approach

Question 21

The "top-down" steps in developing a sales forecast using the breakdown approach include the following except:

A) forecast general economic conditions
B) estimate the industry's total market potential for a product category
C) determine the share of this market the company currently holds and is likely to retain in view of competitive efforts
D) all the above

Question 22

The "top-down" steps in developing a sales forecast using the breakdown approach include the following except:

A) forecast sales of the product
B) estimate the sales of all the competitors' product categories
C) estimate the industry's total market potential for a product category
D) use the sales forecast for operational planning and budgeting

Question 23

Subjective forecasts based on knowledgeable people's opinions instead of being analytically derived refer to __________.

A) jury of executive opinion
B) nonquantitative forecasting techniques
C) naïve forecast
D) sales force composite

Question 24

A sales forecast method based on key managers' best estimates of sales in a given planning horizon refers to a __________.

A) jury of executive opinion
B) nonquantitative forecasting techniques
C) naïve forecast
D) sales force composite

Question 25

The __________ refers to a sales forecast method based on sales force estimates of sales in the planning horizon.

A) jury of executive opinion
B) nonquantitative forecasting techniques
C) naïve forecast
D) sales force composite

Question 26

Forecasting approaches that tabulate responses to questions on surveys or count the numbers of buyers or purchases refers to __________.

A) test marketing
B) surveys of buying intentions
C) time-series technique
D) counting methods

Question 27

Managers evaluate and adjust each salesperson's estimate before combining them to form an overall forecast. The following are advantages of the sales force composite approach except:

A) relies on input from salespeople who are not trained in forecasting, so forecasts are often too optimistic or too pessimistic
B) assigns forecasting responsibility to those held responsible for making the sales
C) helps salespeople accept sales quotas assigned to them because they participate in developing forecasts
D) yields results that are often more reliable and accurate because a larger number of knowledgeable individuals contribute to them

Question 28

Managers evaluate and adjust each salesperson's estimate before combining them to form an overall forecast. The following are disadvantages of the sales force composite approach except:

A) allows estimates to be prepared by products, customers, and territories so a final, detailed forecast is readily available
B) allows salespeople to deliberately underestimate their forecast so they can reach their quotas more easily
C) yields forecasts based on present rather than future conditions, because salespeople often lack the perspective for future planning
D) requires a considerable amount of sales force time that otherwise could be spent in the field attracting new customer

Question 29

The following are advantages of using surveys of buying intentions except:

A) surveys can be expensive and time-consuming in markets with a large number of customers who are not easily located
B) the actual product users determine the forecasts
C) forecasts are relatively fast and inexpensive when only a small number of customers are surveyed
D) research gives the sales forecaster a good prediction of customers' buying intentions and some of the subjective reasoning behind their answers

Question 30

The following are advantages of using surveys of buying intentions except:

A) research gives the forecaster a viable forecasting basis when others may be inadequate or impossible to use, such as when there is no historical data
B) buyer intentions can be inaccurate, since what people say they're going to buy and what they actually buy can differ
C) forecasts are relatively fast and inexpensive when only a small number of customers are surveyed
D) research gives the sales forecaster a good prediction of customers' buying intentions and some of the subjective reasoning behind their answers

Question 31

The following are disadvantages of using surveys of buying intentions except:

A) buyer intentions can be inaccurate, since what people say they're going to buy and what they actually buy can differ
B) the actual product users determine the forecasts
C) forecasts depend on the judgment and cooperation of the product users, some of whom may be uncooperative or uninformed
D) surveys can be expensive and time-consuming in markets with a large number of customers who are not easily located

Question 32

The following are disadvantages of using surveys of buying intentions except:

A) surveys can be expensive and time-consuming in markets with a large number of customers who are not easily located
B) buyer intentions can be inaccurate, since what people say they're going to buy and what they actually buy can differ
C) effects because the demand for industrial products is derived from the demand for consumer products
D) forecasts are relatively fast and inexpensive when only a small number of customers are surveyed

Question 33

A __________ is a popular counting forecasting method for consumer packaged goods products.

A) test marketing
B) surveys of buying intentions
C) time-series technique
D) counting methods

Question 34

Using historical data to predict future sales is called a __________.

A) test marketing
B) surveys of buying intentions
C) time-series technique
D) counting methods

Question 35

Which sales forecasting method is the most often used?

A) simulation models
B) trend projections
C) jury of executive opinion
D) moving averages/exponential smoothing

Question 36

Using historical data to predict future sales is called a __________.

A) autoregressive integrated moving average
B) time-series technique
C) moving average
D) exponential smoothing

Question 37

The forecasts developed mathematically based on sales in recent time periods refer to a __________.

A) autoregressive integrated moving average
B) time-series technique
C) moving average
D) exponential smoothing

Question 38

A type of moving average that represents the weighted sum of all past numbers in a time series, placing the heaviest weight on the most recent data is known as __________.

A) autoregressive integrated moving average
B) time-series technique
C) moving average
D) exponential smoothing

Question 39

A sophisticated forecasting approach based on the moving average concept is known as a __________.

A) autoregressive integrated moving average
B) time-series technique
C) moving average
D) exponential smoothing

Question 40

With regard to correlation and regression analyses, which of the following statements is erroneous?

A) correlation analysis identifies variables that move together without implying cause and effect relationships
B) linear regression defines the relationship between a single independent variable and a dependent variable
C) multiple regression seeks to determine the effect of several independent variables on a single dependent variable
D) in linear regression, the formula for a straight line is y = a + bx, where b is the intercept and a is the slope of a line or trend of the line

Question 41

__________ methods are statistical approaches for analyzing the way variables are related to one another or move together in some way.

A) correlation analysis
B) causal/association methods
C) correlation coefficient
D) regression analysis

Question 42

A __________ measures how much two variables are related to one another.

A) correlation analysis
B) causal/association methods
C) correlation coefficient
D) regression analysis

Question 43

__________ is a statistical approach for predicting a dependent variable such as sales, using one or more independent variables such as advertising expenditures.

A) correlation analysis
B) causal/association methods
C) correlation coefficient
D) regression analysis

Question 44

Regarding regression analysis, all of the following statements are accurate, except that

A) it is one of the most subjective methods used in sales forecasting
B) it determines causal relationships between a company's sales and various independent factors
C) the complexity of this technique often makes some sales managers skeptical regarding the forecast results
D) it can be time consuming and expensive

Question 45

__________ is a quantitative forecast whereby the dependent variable is sales, and the independent variable is time.

A) multiple regression
B) trend analysis
C) econometric models
D) input-output models

Question 46

A tool for forecasting a dependent variable like sales using several independent variables simultaneously refers to a __________.

A) multiple regression
B) trend analysis
C) econometric models
D) input-output models

Question 47

When predicting sales (Y) with five independent variables (X1 - X5), a multiple R-square of 0.493 would indicate that

A) about 49% of the total variation in sales is explained by the independent variables
B) about 70% of the total variation in sales is explained by the independent variables
C) about 49% of the sales forecast cannot be explained at all
D) about 50% of the independent variables should not be used

Question 48

__________ trace economic conditions in the United States by industry, with the objective of capturing, in the form of equations, complex interrelationships among the factors affecting either the total economy or the industry's or company's sales.

A) multiple regression
B) trend analysis
C) econometric models
D) input-output models

Question 49

Complex systems showing the amount of input required from each industry for a specified output of another industry are known as __________.

A) multiple regression
B) trend analysis
C) econometric models
D) input-output models

Question 50

Quantitative sales forecasting techniques include all of the following except

A) the Delphi method
B) time series analysis
C) casual models
D) test marketing

Question 51

Bernie Skolnik is trying to decide what forecasting method to use. He is especially concerned that the forecasting method be (1) understood by top management, and (2) allow for possible changing future market conditions. Mr. Skolnik would be most interested in which of the following criteria for evaluating forecasting methods?

A) comprehensibility and accuracy
B) timeliness and quality of information
C) flexibility and ratio of costs/benefits
D) comprehensibility and flexibility

Question 52

When using time-series methods, forecasters look for the following factors except:

A) periodic movements
B) cyclonic movements
C) cyclical movements
D) erratic movements

Question 53

In multiple regression, the multiple R-square (also known as the coefficient of determination) can be interpreted as:

A) reflecting the degree of association between the dependent variable and the independent variables
B) the percentage of total variation in Y explained by the independent variables
C) a measure of the accuracy of the prediction, i.e., the range of error around forecasting the dependent variable
D) all the independent variables are highly significant in forecasting the dependent variable

Question 54

In multiple regression, the multiple R can be interpreted as:

A) reflecting the degree of association between the dependent variable and the independent variables
B) the percentage of total variation in Y explained by the independent variables
C) a measure of the accuracy of the prediction, i.e., the range of error around forecasting the dependent variable
D) all the independent variables are highly significant in forecasting the dependent variable

Question 55

In multiple regression, the standard error of the estimate can be interpreted as:

A) reflecting the degree of association between the dependent variable and the independent variables
B) the percentage of total variation in Y explained by the independent variables
C) a measure of the accuracy of the prediction, i.e., the range of error around forecasting the dependent variable
D) all the independent variables are highly significant in forecasting the dependent variable

Question 56

In multiple regression, the F-values can be interpreted as:

A) reflecting the degree of association between the dependent variable and the independent variables
B) the percentage of total variation in Y explained by the independent variables
C) a measure of the accuracy of the prediction, i.e., the range of error around forecasting the dependent variable
D) all the independent variables are highly significant in forecasting the dependent variable

Question 57

In multiple regression, the R² values below .2 suggest:

A) good predictive power
B) excellent predictive power
C) poor forecasting power
D) modest predictive power

Question 58

In multiple regression, the R² values between .2 and .5 suggest:

A) good predictive power
B) excellent predictive power
C) poor forecasting ability
D) modest predictive power

Question 59

In multiple regression, the R² values between .5 to .75 suggest:

A) good predictive power
B) excellent predictive power
C) poor forecasting power
D) modest predictive power

Question 60

In multiple regression, the R² values above .75 suggest:

A) good predictive power
B) excellent predictive power
C) poor forecasting power
D) modest predictive power

Question 61

A _____________ is a "financial sales plan outlining how to allocate resources and selling efforts to achieve the sales forecast."

A) sales forecast
B) sales quota
C) sales budget
D) sales audit

Question 62

Budgeting offers the sales department all of the following advantages except

A) ensuring a systematic approach to allocating resources
B) creating awareness of the necessity to coordinate selling
C) establishing standards for measuring the performance of the sales organization
D) none of the above since all are advantages

Question 63

With regard to sales budgets, which of the statements below is inaccurate

A) Budgeting is a type of profit planning in that it provides an operational plan in financial terms
B) Some sales organizations use overlapping budgets, while some others use continuous budgets
C) Sales budgets provide financial standards for evaluating actual results versus budgeted figures
D) Zero-based budgeting takes for granted the continued existence of the sales organization

Question 64

The first step in preparing the annual sales budget is:

A) identify specific market opportunities and problems
B) develop a preliminary allocation of resources
C) review and analyze the situation
D) communicate sales goals and objectives

Question 65

The second step in preparing the annual sales budget is:

A) identify specific market opportunities and problems
B) develop a preliminary allocation of resources
C) review and analyze the situation
D) communicate sales goals and objectives

Question 66

The fourth step in preparing the annual sales budget is:

A) identify specific market opportunities and problems
B) develop a preliminary allocation of resources
C) review and analyze the situation
D) communicate sales goals and objectives

Question 67

The fifth step in preparing the annual sales budget is:

A) review and analyze the situation
B) communicate sales goals and objectives
C) implement the budget and provide periodic feedback
D) prepare a budget presentation

Question 68

The sixth step in preparing the annual sales budget is:

A) review and analyze the situation
B) communicate sales goals and objectives
C) implement the budget and provide periodic feedback
D) prepare a budget presentation

Question 69

Which of the following steps is not a part of the systematic budget preparation process?

A) Review and analyze the situation beginning with the last budget period's variances
B) Request more than actually needed and spend everything you get to ensure obtaining one's fair share of the future budget allocations
C) Develop a preliminary allocation of resources to particular activities
D) Communicate sales objectives and goals with their relative priorities to all management levels

Question 70

A prediction of the future market potential for a specific product is known as market potential.

Question 71

Quotas refer to the portion of market potential that one among a set of competing firms can reasonably expect to obtain.

Question 72

The sales goals for different sales territories and individual salespeople are known as sales potential.

Question 73

Events that are conceivable, but less likely than those based directly on the forecast is known as a contingency.

Question 74

Sales and operational planning process refers to an organized process that uses sales inputs to forecast business for upcoming periods of varying length.

Question 75

Standard Industrial Classification is a uniform numbering system for categorizing nearly all industries according to their particular product or operation.

Question 76

A system for categorizing firms, formally adopted beginning with the 2002 Economic Census and the publication of the 2002 U.S. NAICS Manual refers to the North American Product Classification System.

Question 77

North American Industrial Classification System is a system for categorizing consumer products and service industries.

Question 78

The likelihood customers will actually purchase a given product is known as purchase intentions.

Question 79

A way of developing forecasts based on general economic conditions, typically projected gross national product (GNP) in constant dollars along with projections of consumer and wholesale price indexes, interest rates, unemployment levels, and federal government expenditures is known as the build-up approach.

Question 80

The breakdown approach is particularly useful and reliable when forecasting for periods of six months or longer. The build-up approach becomes more attractive as the time frame gets shorter.