FORECASTING OF SALES, PRICE, COST, REVENUE AND PROFIT
Formula
Sales Forecasting = Current Sales*(1+Growth Rate)
Price Forecasting = Current Price* (1+ Growth Rate)
Cost Forecasting = Current Cost* (1+ Growth Rate)
Revenue Forecasting = Sales forecasting * Price Forecasting
Profit Forecasting = Revenue Forecasting – Cost Forecasting
Problem 1: Sales Forecasting
Data Recap: Sparkle Beverage Company
Yea Units Sold Growth
r (Bottles) Rate
1 50,000 4%
2 52,000 5%
3 55,000 6%
Question: Forecast the number of bottles sold in Year 5, assuming the growth
rate remains at 6%.
Answer:
Sales Forecast=Current Sales×(1+Growth Rate)
Year 4 Sales = 55,000×(1+0.06)=55,000×1.06=58,300
Year 5 Sales = 58,300×(1+0.06)=58,300×1.06=61,798.
The forecasted sales for Year 5 are 61,798 bottles.
Problem 2: Cost Forecasting
Data Recap: Stellar Electronics (Production Cost Per Unit)
Yea Production Annual Cost Increase
r Cost ($) Rate
1 50 5%
2 52.50 6%
3 55.65 4%
Question: Forecast the production cost per unit for Year 5.
Answer:
Cost Forecast=Current Cost× (1+Growth Rate)
Year 4 Cost = 55.65× (1+0.04) =55.65×1.04=57.88USD.
Year 5 Cost = 57.88× (1+0.04) =57.88×1.04=60.20USD.
The forecasted production cost per unit in Year 5 is $60.20.
Problem 3: Revenue Forecasting
Data Recap: TechGear Mobile Accessories
Yea Units Sold Price Per Growth Rate (Units Price Increase
r (Chargers) Unit ($) Sold) Rate
1 100,000 15 3% 2%
2 103,000 15.30 5% 3%
3 108,150 15.76 6% 4%
Question: Forecast the revenue for Year 4, assuming the growth rate in units
sold remains at 6%, and the price per unit increases by 4%.
Answer:
Sales Forecast=Current Sales× (1+Growth Rate)
Price Forecast=Current Price x (1+Growth Rate)
Revenue Forecast= Sales Forecast x Price Forecast
Year 4 Sales = 108,150×(1+0.06)=108,150×1.06=114,639units.
Year 4 Price = 15.76×(1+0.04)=15.76×1.04=16.39USD.
Year 4 Revenue = 114,639×16.39=1,878,964.21USD.
The forecasted revenue for Year 4 is $1,878,933.21.
Problem 4: Sales and Cost Forecasting
Data Recap: Luxury Furniture Ltd.
Yea Sales Price Per Cost Per Sales Growth Cost Increase
r (Units) Unit ($) Unit ($) Rate Rate
1 2,000 500 300 5% 4%
2 2,100 520 312 6% 3%
3 2,226 540 325 5% 3%
Question 1: Forecast the number of units sold in Year 5.
Answer:
Sales Forecast=Current Sales× (1+Growth Rate)
Year 4 Sales = 2,226× (1+0.05) =2,226×1.05=2,337.30 units.
Year 5 Sales = 2,337.30× (1+0.05)=2,337.30×1.05=2,454.17 units.
The forecasted sales for Year 5 are 2,454.17 units.
Question 2: Estimate the total cost of production for Year 5.
Answer:
Cost Forecast=Current Cost× (1+Growth Rate)
Year 4 Cost Per Unit = 325× (1+0.03) =325×1.03=334.75 USD.
Year 5 Cost Per Unit = 334.75× (1+0.03) =334.75×1.03=344 USD.
Total Production Cost for Year 5 = 2,454.17×344.79=846,173 USD.
The total cost of production for Year 5 is $846,173.
Problem 5: Revenue Forecasting with Seasonal Fluctuations
Data Recap: Oceanic Apparel (Seasonal Sales)
Quart Sales Price Per Seasonal Sales
er (Units) Unit ($) Growth (%)
Q1 12,000 30 5%
Q2 14,000 32 8%
Q3 16,000 33 10%
Q4 18,000 34 12%
Question: Forecast the total revenue for next year’s Q3, assuming the sales
growth rate remains 10% and the price per unit increases by 3%.
Answer:
Sales Forecast=Current Sales× (1+Growth Rate)
Price Forecast=Current Price x (1+Growth Rate)
Revenue Forecast= Sales Forecast x Price Forecast
Next Year’s Q3 Sales = 16,000×(1+0.10)=16,000×1.10=17,600 units.
Next Year’s Q3 Price = 33×(1+0.03)=33×1.03=34.00USD.
Next Year’s Q3 Revenue = 17,600×34.00=598,400USD.
The forecasted total revenue for next year’s Q3 is $598,400.
Questions:
Forecast the sales, production costs, revenue, and profit for Nova Electronics'
Smart TVs and Home Speakers over the next five years.
Smart Home
Smart Home Smart TV Home Speaker
Yea TV Speaker
TV Sales Speaker Production Production
r Price Sales
(units) Price ($) Cost ($/unit) Cost ($/unit)
($) (units)
1 50,000 600 30,000 150 300 80
2 55,000 620 33,000 155 310 85
3 60,000 640 36,000 160 320 90
4 70,000 650 38,000 165 330 95
5 75,000 670 40,000 170 340 100
Additional Factors:
1. Smart TV:
o Annual Growth Rate in sales: 5%
o Price Increase Rate: 3% per year
o Production Cost Increase Rate: 4% per year
o New Model Launch: In Year 6, introduce a new model that
increases sales by 15% in that year.
2. Home Speaker:
o Annual Growth Rate in sales: 6%
o Price Increase Rate: 2.5% per year
o Production Cost Increase Rate: 3.5% per year
o Market Saturation: Sales growth will decrease to 3% annually
starting in Year 7.
Answer: Refer Excel
