Lawrence Simulation

In the Guillermo Furniture Store Scenario, Guillermo is confronted with some extremely tough choices.   Guillermo’s furniture store use to be the only furniture store in Sonora, Mexico, Guillermo now confronted with new competition from an overseas company and a national distributor setting up shop in Sonora.   Larger companies like Wal-Mart, and companies of the same caliber are phasing out small companies almost daily because they are able to do it on a large scale and a much higher rate, still offering competitive pricing that intrigues the consumer.
As a result of the new competition and larger companies taking up residence in Sonora, Guillermo finds costs on the rise and profits on the decline.   Guillermo has three alternatives to his current business plan, they are:
1. Apply high-tech methods to the production cycle
2. Represent another company through a merger
3. Create a line of stain resistant coatings to add value to his furniture

Three very valuable questions that will be examined throughout the paper:
• How could Guillermo use budgets and performance reports in his decision making process?
• How might ethics influence his accounting decisions?
• What accounting information is most relevant for Guillermo to consider when making decisions?

Management uses budgets as a planning and control tool to   make better decisions about business.   Budgets include both revenue and expenditures, setting the guidelines by which a company can measure its profit and loss.   Guillermo can thereby use budgeting methods to compare the three alternative plans and examine each for the best course of action to take for his company. (Hongren, 2008)   This type of analysis is known as an incremental analysis in which all aspects including the fact that all unavoidable costs remain constant regardless of the path the company takes.   The other piece of the puzzle would be performance reports, which provide a means of comparing results of all plans showing the...