Gillermo Furniture Store Analysis
Dechazlon Burnett, Basma Fawaz, Jon Ehm, Janice Schmitt, Jenna Snowden
University Of Phoenix
Accounting
561
Michael De Marco
November 14, 2010
Introduction

Gillermo Furniture Store Analysis
Risks Associated with Sales Forecasts

Sales forecasting and budgeting are important tools used to evaluate the results of the company. The sales forecasting are used as guidelines that direct the company to the right path and help the management achieve the company’s goals. The company may face many risks when forecasting or creating budget and this is related to unethical decision making. Sometimes mistakes occur either because of misrepresentation of numbers when creating a budget or because wrong decisions made by managers that aimed to increase income and resources. This will cause financial loss and failure to the company because the data used in the budget are inaccurate that will cause errors in the future numbers.

According to Horngren, (2008) sales forecast is defined as, “a prediction of sales under a given set of conditions.” Forecasting is usually done using many techniques and the most important is based on data from past history to predict the future demand. The only error that may occur is that when there is a mistaken assumption in the past sales demand will continue into the future (Chase, 1993.)

Guillermo Furniture store considers sales forecasting as a strong foundation to build the company’s sales budget. Guillermo recognizes the risks from using past demand data and he is aware of what the drivers of sales demand are for his furniture now. Therefore, he can make predictions on the future and he should consider other risks that involve evaluating the effects of increased competition and accounting for the increased costs in labor. The forecast is based on wise decision making, on past sales performance,