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Guillermo Flex Budget Essay

715 words - 3 pages

Guillermo

Guillermo Furniture Store Flex Budget Assignment

University of Phoenix
ACC 566 Accounting
Professor Marni Nelson-Snyder
11/22/2010

Introduction

Risks Associated With Sales Forecast
“A sales forecast is a prediction of sales under a given set of conditions.” (Horngren, et al., 2008, p. 303) An accurate sales forecast is the foundation on which an effective budget is created. Yet there are many risks associated with creating an accurate sales forecast. As Guillermo considers changes to his business model, he must carefully consider the conditions and assumptions that his sales forecast will be based upon.
One of the risks associated with creating an accurate sales ...view middle of the document...

Offering different products, at different price levels can have a beneficial or adverse effect on his sales revenue. He will want to consider this when building his budget.
Analysis of Ethical Considerations in Budget Preparations
As Guillermo prepares his budget, he must consider the ethical standards of his company and his employees. A budget is only as valid as the information that is used to create it. A main problem that affects budgetary inputs is unwanted incentives tied to the budgetary system. “When managers realize...rewards are tied to meeting targets,...they have incentives to take actions to meet the targets” (Horngren, et al, 2008, 297).
Additionally, Guillermo must consider the impact any budgetary changes will have on himself, his family, his employees, and the community. Any financial obligations or contracts that he enters into or has already committed to must be honored. The financial ramifications of such decisions could have far reaching effects on the company and the community.

Ethics Analysis
In Guillermo’s particular situation, he has a loyalty to his family, his company, and his community. As he examines his sales forecast, and plans his budget, he must assume a certain about of accuracy about the information...

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