Acc561- Furniture Scenario

Budgets are used as a comprehensive and coordinated plan, expressed in financial terms, for the operations and resources of an enterprise for a given future period. Guillermo can use budgets in his store to formulate the company’s strategies and policies, and ways in which he can implement them. Budgets can also help Guillermo analyze the various options available in his business such as converting production to an automated process, become a marketing representative for the second company, or retain high end custom work and apply flame retardant coating. This type of decision making would help Guillermo measure qualitative as well as quantitative costs. Budgeting would help Guillermo anticipate potential problems with a particular decision and also the potential profits that could be made with that decision. The most important advantage to having a budget in the decision making process is that it allows for cost reporting and evaluating performance in reference to a business decision. Budget reports and the comparison of actual results with the budget, provide an explanation of the causes of variances that may occur with a business decision and also provide an explanation of any corrective actions that should be taken. When there are deviations with the budget- such as overspending or under-spending, it can serve as early warning that Guillermo should revisit his original business decision and take the needed action.

Performance Reports are used in decision making to report on outputs and outcomes of a business. Guillermo can use performance reports to develop service delivery units and base business models around that. Guillermo can also use performance reports to set goals and objectives related to business decisions that are specific in timeframe and determine if there has been a deviation for that original goal. Performance reports can also be used exclusively by Guillermo to determine program inputs in the budgeting process that address the amount of...