Guillermo Furniture Scenario

Guillermo Furniture is a furniture store based in Senora Mexico that creates handcrafted furniture pieces. The owner, Guillermo Navallez, has access to a good supply of lumbar, and inexpensive labor. Guillermo Furniture did not see much competition in this market until the 1990’s, when new competitors entered the market, forcing Guillermo to make decisions that would influence the future of his company. Decision making is a part of any successful company and certain decisions need to be carefully reviewed and analyzed.

Budgets and performance reports are tools that would be used by Guillermo to make informed business decisions. A budget is a quantitative expression of a plan of action and an aid to coordinating and implementing the plan (Horngreen, p.23). Budgets can provide spending guidelines and sets expectations for performance. A budget can be used to compare future alternatives and aid determining expenses that can be avoided. Budgets provide the numbers, and it will provide a more realistic expectation of the current and future financial stability. Performance reports will also be helpful in the decision making made by Guillermo. Performance reports provide feedback by comparing results with plans and by highlighting variances, which are deviations from plans. Organizations use performance reports to judge managers’ decisions and the productivity of organizational units. It compares actual results to budgets (Horngreen, 2008). Performance reports will provide indications of opportunities to implement adjustments for improving operations. A satisfactory report can provide a guideline of future success. By reviewing past purchase and production habits, Guillermo would be able to analyze their effectiveness in consumer response and by providing ways the company negotiates demand for products and services.

When determining which strategies will be most effective for Guillermo will need to consider the most relevant accounting information....