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Flex budget Wk4 search - Flex Budget 1 Flex Budget Team B...

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Flex Budget 1 Flex Budget Team B ACC/561 University of Phoenix May 11, 2008
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Flex Budget 2 Flex Budget Analysis Guillermo Furniture production grew into a thriving enterprise that is now being threatened by foreign competition. Advanced production technologies are forcing proactively to remain a profitable business. “In Mexico, attention to ethics is increasingly viewed as an essential part of business: If your employees are ethical, both within the company as well as with customers and suppliers, the business is likely to reap benefits in the long-term” (Adler, 2009). In an effort to exercise ethical behavior the consulting services of “Team B” have been retained to explore “Flex Budget” options and the key components. A sales forecast is a prediction of sales based on previous sales performance to develop an analysis of market conditions. A disadvantage from using past data for current results is that prior information may be obscured. Therefore, managers must use caution when operating with a sales forecast for their long and short term planning, due to inherent risks involved. The most influential risks of sales forecasts stem from unethical decision-making. The various reasons that lead managers to unethical decision-making and that affect the risks of sales forecasts. First, managers may want to increase resources to become more productive and aid in advanced perquisites or salary. Other organizations may use budgets as employee performance evaluations that cause increased activity in exaggerating company budgets. This form of activity is considered budget padding , where managers either over or under exaggerate their numbers to more easily obtain targeted profit goals. A potential risk from this form of decision-making is
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