Guillermo Furniture

Guillermo Navallez is a furniture producer in Sonora, Mexico. Despite being a very popular vacation area, Sonora, Mexico is also a prime location for furniture production because of the large amounts of timber and inexpensive labor cost. Prior to the 1990s Navallez’s furniture business was very successful generating large amounts of profit because of the cheap labor cost and no competition. During the 1990s a foreign furniture company set up operations in Sonora ultimately causing Navallez to experience a decrease in revenue. As an independent manufacture, Navallez cannot compete with the technical advantages of the competitor. Another factor causing Navallez to experience economic hardship is the emergence of a large and popular retailer in the area. Unfortunately, Navallez cannot compete with the lower cost and larger production rate of his competitors.

Budgets and Performing Reports

As Navallez’s foreign competitors use Sonora’s abundance of timber and inexpensive labor cost to generate large profits, Navallez must begin to evaluate the company’s decisions making. Decision making – the purposeful choice from among a set of alternative courses of action designed to achieve some objective – is the core of the management process (Horngren, 2008). To improve the company’s decision making, Navallez must first construct a budget to put his plans into motion. Budgeting is very important because it allows the company to determine many financial issues such as projections and profits. By formulating a budget, Navallez can begin to decrease and increase specific line items as necessary. As the foreign competitors begin to produce specialize products, Navallez can begin to do the same. By targeting a specific group of consumers, Navallez can decrease the amount of supplies and add the additional funds to another line item or use the funds as extra revenue. With the extra funds coming from decreasing supplies Navallez may decide allocate for marketing and advertising....