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ACC 561 Guillermo Furniture Store Analysis Week 4




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ACC 561 Guillermo Furniture Store Analysis Week 4
University of Phoenix
Guillermo Furniture Store Analysis
This document presents the major components of a budget that includes the risks
associated with sales forecasts, and an analysis of ethical considerations in the
preparation and subsequent use of the budget. Consideration is given for the
requirements of the organizations code of ethics in the use of any performance
Major Budget Components
A master budget is an extensive analysis of the first year of the long-range plan. The
master budget summarizes planned activities of departments and subunits of an
organization. The master budget is a formal measurable expression of
management's plans. This budget is also a visionary plan for the upcoming period or
future, and allows well-organized change rather than disorganized reaction to
The two major components of a master budget are operating and financial budget.
The operating budget focuses on the income statement that includes supporting
schedules of a sales, purchase, cost of goods sold, operating expenses budget, and
the budgeted income statement. The financial budget focuses on the results of the
operating budget and other plans such as capital budgets and debt repayments will
have on cash and the budgeted balance sheet (Horngren, Sundem, Stratton,
Burgstaler, & Schatzberg, 2008).
Operating Budget Financial Budget
Sales Forecasting Risk Assessments
According to Horngren, et. al. (2008) the sales budget is defined as the basis for the
master budget, whereas the sales forecast is defined as, “a prediction of sales under
a given set of conditions.” Using history is the most popular way of forecasting sales

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demands or revenue. History does not necessarily repeat itself for numerous
reasons such as changing trends for one example. This is a major risk and could be
quite costly in forecasting the future (Chase, 1993). Guillermo’s risk in using his own
history is that the past demand has changed with the new competition. Guillermo
must clearly understand what the drivers of the sales demand are for his furniture so
that he can make predictions on the future. His other risks to consider when creating
the sales forecast involve evaluating the effects of increased competition regarding
sales prices, and accounting for the increased costs in labor.
Preparatory and Subsequent Ethical budget Considerations
Businesses around the world try to develop, compare, and implement the best
ethical codes. However, employers need to use performance tools in regular
intervals to check for any unethical behaviors. Organizations, from top to bottom,
have a sense of moral responsibility. According to Valentine and Barnett (2003), a
formal code of ethics may increase positive perceptions of the ethical values of the
organization. Top management must explicitly follow all ethical codes and ensure
that they are implemented throughout the organization. If top management does not
act ethically, employee behavior may deplete throughout the entire organization.
Employers and their managers must ensure each member of the staff is aware of the
ethical codes, and he or she performs an ethical analysis regularly.
Ethical Performance Tools for Budgeting The ethics code is “a set of guidelines
which are designed to set out acceptable behaviors for members of a particular
group, association, or profession” (Wisegeek, 2011). It outlines those actions or
activities that ensure the business operates in an honest and forthright manner.
Oftentimes a code of ethics is an industry-specific document such as in health care,
accounting, or in the legal profession.
Through applying elements of a code of ethics during the budgeting process,
incentives to lie or cheat in preparing the document can be avoided. Holding
managers individually to practice a high ethical standard will help alleviate the
temptation to provide biased or inaccurate information of others under their
guidance. Altering the budget to ensure that sales or expenditure goals are met may
be avoided. “The main way to avoid lying in preparing the budget is to reward good

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