Guillermo Furniture Analysis

      In the Guillermo Furniture Store Scenario, Guillermo, the owner of a local furniture manufacturing business, in Sonora, Mexico, saw the impact of a local economy growing, overseas competitors, and modern technology producing the same quality furniture while maintaining inexpensive prices. This paper will analyze the risks associated with sales forecasts and the Ethical considerations in the preparation and subsequent use of the budget. This paper will also discuss how ethics might influence his accounting decisions.

Risks Associated with Sales Forecasts

      The sales forecast is a prediction of a business's unit and dollars sales for some future period of time, up to several years or more. These forecasts are generally based primarily on recent sales trends, competitive developments, and economic trends in the industry, region, and/or nation in which the organization conducts business. Sales forecasting is management's primary tool for predicting the volume of attainable sales. Therefore, the whole budget process hinges on an accurate, timely sales forecast.
      Sales forecasts are conditional in that a company prepares the forecast prior to developing strategic and tactical plans. The forecast of sales potential may cause management to adjust some of its assumptions about production and marketing if the forecast indicates that:
  1) Current production capacity is inadequate or excessive.
  2) Sales and marketing efforts need revisions. Management, therefore, has the opportunity to examine a series of alternate plans that propose changes in resource commitments (such as plant capacity, promotional programs, and market activities), changes in prices and/or changes in production scheduling.
      Although sales forecasts may accurately project significant changes in market conditions, a company needs to thoroughly examine its own resources to determine its ability to respond to these changes.

Analysis of Ethical Considerations...