Guillermo Furniture Store Scenario

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Date Submitted: 11/03/2010 08:45 PM

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Guillermo Furniture Store

Guillermo Navallez makes furniture near his home in Sonora. Mexico. Sonora is a major vacation location and is a large furniture manufacturing location in North America. This area is abundant in timber that Guillermo uses to manufacture tables and chairs made by his company. In addition to great resources, the labor cost is inexpensive enabling Guillermo charge a premium price for his hand-crafted furniture. During the 1990s, Guillermo’s profits began to decline because a new competitor entered the market and a migration of people began settling in to the Sonora area. The increase of people caused the cost of labor to increase substantially and profits to decrease. This paper will explain how Guillermo Navallez can use budgets and performance reports in his decision-making process. How ethics may influence his accounting decisions. Finally, the paper will discuss what accounting information is most relevant for Guillermo Navallez to consider when making decisions.

Decision-making is an important aspect to everyone for day-to day actions. Decision-making is very important to business management in areas of planning, coordinating, budgeting, controlling, and communicating. Budgets are planning and control mechanism that managers use to help make effective decisions. As a financial guideline the budget includes revenue and expenditures that managers use to provide performance goals. Guillermo should use his budgets and performance reports to determine what attention directing areas in which there are operating problems, inefficiencies, and opportunities (Horngren et al, 2008). When the inefficient areas are determined Guillermo should find a problem-solving strategy and possible recommendations for a course of action to reduce cost and increase profits.

At this point in time Guillermo has a large competitor that uses high-tech equipment that produces exact cuts in wood to buyers’ specifications at low prices. The...