Guillermo Furniture Store Analysis
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Guillermo Furniture Store Analysis
Sales forecasting is a complex undertaking in the business environment. The sales budget depends entirely on the forecast to predict sales under a given set of conditions (Horngren, Sundem, Stratton, Burgstahler, & Schatzberg, 2008). To be accurate a sales forecast should consider several factors including current industry trends, technological advancement, previous market share, and general economic conditions (Weygandt, Kieso, & Kimmel, 2005). A flexible budget shows the revenue and cost to expect at different levels of activity. Appendix A shows that Guillermo furniture store will be most profitable when sales is at 2,500 for the mid-grade and 400 for high-end furniture.
Using the sales forecast to determine the amount of raw materials to purchase and the amount of finished product to make entail possibilities of errors and risks in making management accounting decisions. An under forecast results when the store does not produce enough furniture to meet demands. The outcome is a loss in sales and possible loss of customers. An over forecast often results in an excess purchase of raw materials and production of finished product. An excess in raw materials will tie up capital and an excess in finished product will take up costly warehousing space. An under forecast may result not possessing enough staff to meet demands. As a consequence, employees become overloaded, have to work overtime and service level deteriorates. This drives costs up and the quality of the finished product decreases. In contrast, an over forecast results in underutilization of employees and other resources (Worth, 2010).
In the business world today ethics is a key to becoming a trustworthy and profitable company. With collapses such as Enron and WorldCom fresh on the investors mind ethics is the key to having a successful capital raising campaign. It is for this reason that chief executive officers (CEO’s) and chief financial officers (CFO’s)...
Sales forecasting is a complex undertaking in the business environment. The sales budget depends entirely on the forecast to predict sales under a given set of conditions (Horngren, Sundem, Stratton, Burgstahler, & Schatzberg, 2008). To be accurate a sales forecast should consider several factors including current industry trends, technological advancement, previous market share, and general economic conditions (Weygandt, Kieso, & Kimmel, 2005). A flexible budget shows the revenue and cost to expect at different levels of activity. Appendix A shows that Guillermo furniture store will be most profitable when sales is at 2,500 for the mid-grade and 400 for high-end furniture.
Using the sales forecast to determine the amount of raw materials to purchase and the amount of finished product to make entail possibilities of errors and risks in making management accounting decisions. An under forecast results when the store does not produce enough furniture to meet demands. The outcome is a loss in sales and possible loss of customers. An over forecast often results in an excess purchase of raw materials and production of finished product. An excess in raw materials will tie up capital and an excess in finished product will take up costly warehousing space. An under forecast may result not possessing enough staff to meet demands. As a consequence, employees become overloaded, have to work overtime and service level deteriorates. This drives costs up and the quality of the finished product decreases. In contrast, an over forecast results in underutilization of employees and other resources (Worth, 2010).
In the business world today ethics is a key to becoming a trustworthy and profitable company. With collapses such as Enron and WorldCom fresh on the investors mind ethics is the key to having a successful capital raising campaign. It is for this reason that chief executive officers (CEO’s) and chief financial officers (CFO’s)...