Guillermo Furniture Store
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The Guillermo Furniture Store Scenario Analysis
Introduction
Guillermo Navellez, of Sonora, Mexico, made high-end custom furniture for years in his home. Unfortunately for him in the 1990’s, a new competitor from overseas using a high-tech approach to furniture making entered the market and sold its product a “rock bottom” prices. Furthermore, his community expanded in popularity and population which ultimately drove up labor prices, which conversely shrunk Guillermo’s profits. With these two events, Guillermo had some tough decisions to make in order to save his business and continue to remain profitable as a furniture maker. (The Guillermo Furniture Store Scenario, 2009, website)
How Guillermo uses Reports in Decision Making
Both budgets and performance reports support planning and control. (Managerial Accounting, Chapter 1, page 13) Guillermo could use his projected budget as a guide to remain under expected costs. Whenever a company exceeds their projected variable costs, this usually means they are going to lose money over time. Conversely, if they practice remaining under budget without sacrificing the quality of their product, then they can increase profits and satisfy organizational objectives. As for the performance reports, Guillermo can examine where he needs to increase efficiency in order to remain competitive with his competition. This is an important because he can compare his actual costs to his projected budget to see if any variances are deviating from his original plans. With this information from both his projected budget and performance reports, Guillermo can become motivated to make decisions to stay within his budget and reach his objectives.
How Ethics Influence Accounting Decisions
In any business, it is extremely important to have high ethical standards in the workplace, especially when dealing with money. Guillermo could always “cook the books” and make his profits look better; however, this would inevitably hurt his...
Introduction
Guillermo Navellez, of Sonora, Mexico, made high-end custom furniture for years in his home. Unfortunately for him in the 1990’s, a new competitor from overseas using a high-tech approach to furniture making entered the market and sold its product a “rock bottom” prices. Furthermore, his community expanded in popularity and population which ultimately drove up labor prices, which conversely shrunk Guillermo’s profits. With these two events, Guillermo had some tough decisions to make in order to save his business and continue to remain profitable as a furniture maker. (The Guillermo Furniture Store Scenario, 2009, website)
How Guillermo uses Reports in Decision Making
Both budgets and performance reports support planning and control. (Managerial Accounting, Chapter 1, page 13) Guillermo could use his projected budget as a guide to remain under expected costs. Whenever a company exceeds their projected variable costs, this usually means they are going to lose money over time. Conversely, if they practice remaining under budget without sacrificing the quality of their product, then they can increase profits and satisfy organizational objectives. As for the performance reports, Guillermo can examine where he needs to increase efficiency in order to remain competitive with his competition. This is an important because he can compare his actual costs to his projected budget to see if any variances are deviating from his original plans. With this information from both his projected budget and performance reports, Guillermo can become motivated to make decisions to stay within his budget and reach his objectives.
How Ethics Influence Accounting Decisions
In any business, it is extremely important to have high ethical standards in the workplace, especially when dealing with money. Guillermo could always “cook the books” and make his profits look better; however, this would inevitably hurt his...