Check Your Knowledge

Print this page

Question 5

Your company's marketing department is forecasting a 15% increase in sales revenue next year. What assumptions should you, the production department manager, make from this forecast as you prepare your budget for next year?

Click the button next to the correct answer choice. After you have read the feedback, explore the other choices. Note: Your first selection will be used in tallying your score.

  • That sales volume will increase 15%

  • Not the best choice. You can't actually make any assumptions to inform your own budget until you've identified the assumptions behind the marketing department's revenue forecast. For example, the marketing manager may assume that the projected growth in revenue will come from a lower selling price and a dramatic increase in volume; a higher selling price and a decline in the number of units sold; or a jump in sales volume due to other factors such as increased spending on advertising. Each of these assumptions will have different implications for your budget. Only after you've clarified marketing's assumptions can you then begin preparing your own budget.

  • No assumptions can be made from this forecast.

  • The best choice

    Correct choice. Before you can make assumptions that inform your own budget, you must identify the assumptions behind the marketing department's revenue forecast. For example, the marketing manager may assume that the projected growth in revenue will come from a lower selling price and a dramatic increase in volume; a higher selling price and a decline in the number of units sold; or a jump in sales volume due to other factors such as increased spending on advertising. Each of these assumptions will have different implications for your budget. Only after you've clarified marketing's assumptions can you then begin preparing your own budget.

  • That sales volume will remain the same next year.

  • Not the best choice. You can't actually make any assumptions to inform your own budget until you've identified the assumptions behind the marketing department's revenue forecast. For example, the marketing manager may assume that the projected growth in revenue will come from a lower selling price and a dramatic increase in volume; a higher selling price and a decline in the number of units sold; or a jump in sales volume due to other factors such as increased spending on advertising. Each of these assumptions will have different implications for your budget. Only after you've clarified marketing's assumptions can you then begin preparing your own budget.

Click here to exit the program. Warning, this will close your session. You will be able to return to the course, but any evaluation of your progress/performance will not count after you have clicked this button.