A major change in competitive environment due to a new competitor requires what first response for Endothon’s budgets for next year?

• A. Modify the sales budget
• B. Redesign the production schedule
• C. Increase the cash budget
• D. Eliminate the marketing budget

Answer: (A)

When competition shifts, the essential first step is to update the expected sales for next year. The sales budget sets the forecast for how many units will be sold and at what price, which directly drives revenue projections. If a new competitor is likely to affect demand or pricing, Endothon must revise the sales plan to reflect the anticipated market response. Once the sales forecast is updated, you can align production, cash flows, and marketing plans to that new revenue picture. Redesigning the production schedule would come after the sales forecast is adjusted, while altering the cash budget or eliminating marketing aren’t appropriate first moves without understanding how much revenue is actually expected.