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Guillermo Furniture Store Paper

ACC/561

April 25, 2011

Guillermo Furniture Store Paper

Guillermo’s furniture company is based in the city of Sonora, Mexico. In the beginning, the company business was flourishing because prices of their hand crafted furniture’s were at low for the quality they were selling (University of Phoenix, 2011). Until the late 1990, everything was going fine, but things started changing when the new international companies entered the same furniture market using latest technology methods and with low prices (University of Phoenix, 2010). Also the citizens of Sonora become conscious of this arising furniture competition and this caused a growth in this business (University of Phoenix, 2011). Due these factors, Guillermo started losing their profit and the labor costs also become high. This paper will determine how cost relationships and behaviors determine decision-making prerogatives for managers and what control system might be used to help achieve Guillermo’s furniture store’s goals.

Cost Relationships and Behaviors

Cost relationships at Guillermo Furniture store are very important for the manager to consider when making decisions for the company. Guillermo is currently trying to make the decision of whether he should purchase machines to automate the creation of his furniture. He is also trying to decide whether he should become a distributor for an overseas competitor. While making these decisions, cost relationships are important for him to consider.

Guillermo will have to consider what the equipment that will automate the furniture making process will cost, compared to how much labor is currently costing him. The new fixed costs that will be incurred are costs to run the machines (electricity will have to consider what the equipment that will automate the furniture making process will cost, compared to how much labor is currently costing him. The new fixed costs that will be incurred are costs to run the machines...