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Answer to Question #54485 in Other Economics for mai nguyen

Question #54485
1. What happens to assumptions over time and what makes the best budget assumptions and what happens to invalid assumptions?

2. Your company Apollo is second in the manufacturing industry. The market leader has introduced an innovative product which is expected to wipe out market share for rovers (one of Apollo’s key products) which currently bring in a quarter of revenue and are responsible for a third of expenditures. Revenue forecast and budget expense revision is necessary.

What impact will the market leader’s actions have on your revenue forecast and expense budget:

If total original revenue assumptions were forecast at $700,000 and total expense assumptions added to $1,000,000?
What would the impact on financial performance be in dollars?
Expert's answer
1. The assumptions may be changed over time and the best budget assumptions will be actual much longer than the invalid assumptions.

2. If the market leader has introduced an innovative product which is expected to wipe out market share for rovers which currently bring in a quarter of revenue and are responsible for a third of expenditures, and if revenue forecast and budget expense revision is necessary, then the market leader’s actions will decrease your revenue forecast and increase your expense budget.
If total original revenue assumptions were forecast at $700,000 and total expense assumptions added to $1,000,000, then the financial performance in dollars will be worse and the Apollo may face losses.

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