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© Oxford University Press 2011
Chapter - 16Chapter - 16Sales and Cost Sales and Cost
AnalysisAnalysis
© Oxford University Press 2011
Learning ObjectivesLearning ObjectivesUnderstand the concept, features, and
methods of sales analysisAppreciate the importance of sales quota
and guidelines for setting the sales quotaKnow the methods of determining the sales
quotaUnderstand the concepts and objectives of
cost analysisIdentify the areas of cost control in
improving salesLearn the methods of determining cost
control in sales operations2
© Oxford University Press 2011
Definition of Sales Definition of Sales AnalysisAnalysisMorris (1992) defined sales
analysis as breaking down of sales, costs, and profit levels by products, product line, territory, customer segments, salespeople, and distributor types to generate a complete frame of sales performance in a geographic area within a limit.
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Features of Sales AnalysisFeatures of Sales AnalysisComprehensive study made to
evaluate sales performance.Integral step of sales audit.Gives accuracy in sales forecasting.Controls sales activities.Reveals strengths and weaknesses
of sales plans.Helps to understand the efficacy of
sales operations.
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Features of Sales AnalysisFeatures of Sales AnalysisIt is necessary to study cost
effectiveness and efficiency of sales operations.
It is a tool to measure sales productivity.
It is important to understand the sales potential of a geographic area.
It is important to classify territories into high, moderate and low potential units.
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Features of Sales AnalysisFeatures of Sales AnalysisGuides in detecting the sales
problems in an area.Helps to estimate a company’s
actual market share.It is a part of company’s strategic
sales management programme.
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Sales Analysis at Sales Analysis at Individual UnitsIndividual UnitsSalespeople as a unit.Product/Product line as a unit.Customers as a selling unit.Territory as a selling unit.
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Methods of Sales AnalysisMethods of Sales AnalysisSales variance analysis.Unit-based sales variance.Sales effectiveness index.Sales growth.Market Share analysis.
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Definition of Sales QuotaDefinition of Sales QuotaKurtz and Boone (2009) defined
sales quota as the specified sales or profit targets that the firm expects salespeople to achieve.
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Sales Quota- A Tool for Sales Sales Quota- A Tool for Sales AnalysisAnalysisA quota is a quantitative
standard being allocated to the sales units and is expressed in absolute terms.
Quotas help compare actual sales with target sales.
Quota is the benchmark which sales managers use to perform sales analysis.
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Types of Sales QuotaTypes of Sales QuotaSales volume quota.Financial quota.Activity quota.Combination quota
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Sales Volume QuotaSales Volume QuotaSales in monetary terms
( rupees, dollars, etc.)Sales in units (number of pieces)Sales in quantity (kilograms,
pounds, etc.)
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Financial QuotaFinancial QuotaGross margin or net profit.Budget quota can consider
selling expenses as well.Ideal to use when companies
handle low and high margin products.
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Activity QuotaActivity QuotaNumber of sales calls.Number of new customers procured.Number of sales demonstrations
made.Number of intermediaries handled.Number of installations or
commissioning works completed in customer premises.
Number of missionary-selling activities undertaken.
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Cost AnalysisCost AnalysisCost analysis is the review and
evaluation of a company’s cost data and its comparison with the anticipated cost data furnished in the annual budget.
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Classification of CostsClassification of CostsSelling overheads.Distribution overheads.Expired costs.Deferred costs.Fixed and variable costs
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Cost ControlCost ControlSpot the redundant expense
items.Route plans.Travelling costs.Time schedules.Product/service quality.Proper selection and training of
salespeople.
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Cost ControlCost ControlCost of sales force supervision.Planning promotional budget
carefully.Control of costs of logistics.
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Methods of Cost AnalysisMethods of Cost AnalysisGross Profit and Net Profit Ratios.Expense Ratios.Break-even Analysis.Achieving Target Profits.Preparation of Income
Statement.Return on Investment (ROI)Return on Assets managed
(ROAM)19
