Guillermo Furniture Store

Introduction

The Guillermo Furniture Store, located in the vacationing area of Sonora, Mexico, is a large manufacturer for North America run by the owner Guillermo Navailez. With the Sonora area of Mexico having a good supply of the raw materials needed to produce furniture and supply cheap labor, the Guillermo Furniture Store was doing quite well. However, in the 1990s, two new changes were on the horizon for the company. First a new competitor from overseas was entering the furniture market using high technological techniques to produce furniture to exact specifications at super low prices. Next, one of the largest retailer’s located in the nation’s headquarters moved to an area nearby Sonora. So with the presence of this new retailer, labor costs increased as more and more people moved to the area. Guillermo’s profits began to decrease and costs began to increase.

In order to compete, Guillermo will have to make a decision that will affect the future of his company. Should he merge with another company, change his production method to a more automated process so that hs could have products created faster and cheaper, become a representative for another manufacturer, or set his furniture apart by adding a flame retardant stain to it (University of Phoenix, 2011).

Budgets and Performance Methods

To make the right decision, Guillermo is going to use the planning decision method. This method will set objectives and show how the objectives will be reached. Guillermo will have to decide on how to use budget and performance reports to help make decisions, how will ethics affect accounting decisions, and what accounting information is going to be needed to help make decisions.

The budget, a quantitative expression of a plan of action, will help formalize the spending plan, while the performance reports will provide feedback by comparing the results of the plans. By comparing labor hours, value of production, cost of staining, and/or technology costs...