Guillermo Furniture Store Concept Paper

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Date Submitted: 05/16/2010 01:51 PM

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Guillermo Furniture Store

Guillermo Navallez is the owner of the Guillermo Furniture Store in Mexico and he had inexpensive labor to work for him and his products were priced premium due to their high quality. With inexpensive housing, mild weather, beautiful scenery, traffic-free roads, a new international airport, and plenty of development, an influx of people and jobs raised the cost of labor substantially. He had a patented process for creating a coating for his furniture. Through production, the process first created a common flame-retardant; then, upon further processing, the coating became complete and stain resistant.

Due to certain events, the financial position of the store degraded and especially in terms of debt repayment. In order to control these financial problems he had to take wise and effective decisions and adopt proper measures of forecasting the demand for his products. Before doing sales forecasts, he had to decide upon the following options:

a) Whether he should adopt improved technology for production by purchasing computer controlled laser lathe manufacturing process

b) He should become a representative for a furniture manufacturer in Norway

c) Selling coated furniture

On the basis of these above options he can use the projected information for labor hours, production value and finally assess the profitability under the third option of selling coated furniture. The performance reports from the income information provide comparative data for analysis and forecasting. As per his current situation, he can expect EBIT (Earnings before Interest and Taxes) of $46,118, if he uses the hi-tech method then the Net Income is expected to be $213,174 and finally if he becomes a representative then his net income is expected to be $65,041. Production can be increased by 50%. Due, the this forecasted increase there might be increase or improvement in the sales and profitability of the company. The production data and income...