Week 4 Acc 561
Guillermo Furniture Store Analysis
ACC/561
September 25, 2010
Guillermo Furniture Store Analysis Emerging markets, new processes and increased competition affect business decisions for many small businesses. Guillermo Furniture Store is a small business currently experiencing the affects of emerging competition. Because of this, the organization decided to take a more prominent role in distributing. The authors will be taking a deeper look into this decision and will provide a detailed budget summary including the risks associated with sales forecasts and the important ethical considerations that Guillermo will face during this transition. Furthermore, a revised budget will be provided and included with the following summary.
Risks Associated with Sales Forecasts Guillermo Furniture Store will use sales forecasting to build the company’s sales budget. The sales budget is the foundation from which the master budget is created (Horngren and et. al., 2008). According to Horngren, et. al. (2008) sales forecast is defined as, “a prediction of sales under a given set of conditions.” Forecasting sales is usually done using many different techniques. The most popular technique involves using past history to predict the future demand. A major risk with this method is the mistaken assumption that relationships driving sales demand in the past will continue into the future (Chase, 1993). Guillermo Furniture Store’s risk in using this method is that past demand has changed. Mr. Guillermo must understand what the drivers of sales demand are for his furniture now, so that he can make predictions on the future. Other risks to consider when creating the sales forecast, involve evaluating the effects of increased competition and accounting for the increased costs in labor.
Sales Forecast Sales forecasting and budgeting should be used to evaluate results of a company. They should be used as guidelines and help to set goals for an organization. Many risks
ACC/561
September 25, 2010
Guillermo Furniture Store Analysis Emerging markets, new processes and increased competition affect business decisions for many small businesses. Guillermo Furniture Store is a small business currently experiencing the affects of emerging competition. Because of this, the organization decided to take a more prominent role in distributing. The authors will be taking a deeper look into this decision and will provide a detailed budget summary including the risks associated with sales forecasts and the important ethical considerations that Guillermo will face during this transition. Furthermore, a revised budget will be provided and included with the following summary.
Risks Associated with Sales Forecasts Guillermo Furniture Store will use sales forecasting to build the company’s sales budget. The sales budget is the foundation from which the master budget is created (Horngren and et. al., 2008). According to Horngren, et. al. (2008) sales forecast is defined as, “a prediction of sales under a given set of conditions.” Forecasting sales is usually done using many different techniques. The most popular technique involves using past history to predict the future demand. A major risk with this method is the mistaken assumption that relationships driving sales demand in the past will continue into the future (Chase, 1993). Guillermo Furniture Store’s risk in using this method is that past demand has changed. Mr. Guillermo must understand what the drivers of sales demand are for his furniture now, so that he can make predictions on the future. Other risks to consider when creating the sales forecast, involve evaluating the effects of increased competition and accounting for the increased costs in labor.
Sales Forecast Sales forecasting and budgeting should be used to evaluate results of a company. They should be used as guidelines and help to set goals for an organization. Many risks