Guillermo Furniture Flex Budget

Guillermo Furniture Store Analysis

Guillermo Furniture Store Analysis
Many risks are involved when forecasting and preparing an organizational budget.   Guillermo Navallez, proprietor of The Guillermo Furniture Store, is aware that to compete with the new and larger furniture retailers, he will have to make some changes to the way he does business.   This will involve readjusting his current and future budget. The following will discuss the suggested revisions to Guillermo’s flex budget along with the risks associated with sales forecasts and analysis of ethical considerations in the preparation and subsequent use of the budget, consideration to the organization’s code of ethics, which requires ethics analysis for the suggested performance tools.
Risks Associated with Sales Forecasts
When management is willing to partake in the changes and employees witness the participation and ownership to the plans of the organization, it provides better success of the company.   If Guillermo and his management team do not use the budget effectively, he risks the chance of others in the organization to view the budget “as irrelevant. Even with the support of top management, however, budgets, and the managers who implement them, can run into opposition. One way to reduce these negative attitudes, and simultaneously improve the quality of planning decisions, is to ensure that managers at all levels participate in setting budgets” (Horngren).   Guillermo’s flex budget shows the difference in income that would be associated with adding 100 of the mid-grade units versus 100 of the high end units.   The high end units increase the income more but the managers must make sure that the market demand is such that they will be able to sell the additional units.

|                                             |                               |                                   |                         |...