RUNNING HEAD: Guillermo Furniture Store Scenario Paper
Guillermo Furniture Store Scenario
ACC 561: Accounting
University of Phoenix: Online
May 24, 2010
Guillermo Furniture Store Scenario
Guillermo Navallez is a furniture manufacturer in Sonora, Mexico. His handcrafted furniture is priced higher due to the quality of the product he makes. Unfortunately, a new competitor from Norway entered his local market offering the exact furniture for a lower price. In addition, the small town he operates in became suddenly bustling raising the costs of the used to be cheap labor force. In order to survive in the same community, Guillermo must utilize a budget and performance reports, make ethical accounting decisions, and make informed accounting decisions.
Guillermo must utilize his budget and performance reports in order to survive the new competition and increases in labor costs. A budget is an aid to help a company adhere to its financial plan (Horngren, 2008). According to Guillermo??™s budget, he is over-estimating how many units he will sell each month. This means he is not adhering to his financial plan. He might want to consider using a different way to estimate how many units he will sell. Secondly, he could use his performance reports to help with this estimate. A performance report is feedback received by comparing results with the budget and highlighting deviations from the budget (Horngren, 2008). If he sold, for example, 10% less high-end items then he was expecting to, and then the next month he could estimate 10% less than his first estimate may be.
In order to outlive the new competition and rising labor costs, Guillermo must make ethical accounting decisions. How Guillermo makes ethical decisions in his life will affect how he makes ethical decisions in his company. In order to make sound, ethical decisions, Guillermo should make sure he is focusing on long-term results, paying attention to the small details, paying attention to the current economic cycle, and is well aware of the accounting laws and regulations (Horngren, 2008). If Guillermo is focusing on short-term results for his furniture company, he may make unethical decisions and comprise the integrity of his company to achieve the results he wants. However, if he would focus on long-term results he would be more likely to keep the integrity of his company in mind. Also, many ethical dilemmas start in the small details within companies (Horngren, 2008). By paying attention to these small details, and making sure everything is ethical, and then Guillermo will be less likely to get engaged in an unethical situation. Finally, many ethical dilemmas happen when accountants and companies ignore the economic cycle and accounting laws and regulations. Guillermo needs to pay attention to both of these items closely. By making ethical decisions, Guillermo will be able to stay ahead of his competition.
Guillermo needs to use relevant information in his decisions. Relevant information the predicted future costs and revenues that will differ among alternative courses of action the company may take. For example, the cost of the alternate coating compared to the cost of the current coating used would be relevant information needed when deciding if he still wants to coat his furniture or switch to a different type of coating. In order to make sound and ethical accounting decisions, Guillermo must consider some of the following relevant information. Guillermo must consider the cost of his labor, the cost of his competition??™s labor, the cost of his material, and other overhead expenses.
In conclusion, Guillermo needs to utilize his budget and performance reports and make ethical decisions based on relevant information in order to survive the rising costs and increased competition of the furniture market in Sonora, Mexico.
Horngren at el. (2008). Introduction to Management Accounting (14th ed.). New Jersey: Pearson-Prentice Hall.
Content60 Percent | Points Available4 | Points Earned4 | Additional Comments: |
The paper clearly and effectively demonstrates the following: * How Guillermo could use budgets and performance reports in his decision-making process * How ethics might influence his accounting decisions * What accounting information is most relevant for Guillermo to consider when making decisions | | | ? Good work! |
Organization / Development20 Percent | Points Available1 | Points Earned1 | Additional Comments: |
* The paper is no more than 700 words in length. * Student provided sufficient background on the topic and previews major points. * The paper is logical, flows, and reviews the major points. | | | ? Good work! |
Mechanics 20 Percent | Points Available1 | Points Earned.75 | Additional Comments: |
* Formatting or layout and graphics are pleasing to the eye (font, colors, spacing). * Rules of grammar, usage, and punctuation are followed, and spelling is correct. | | | ? Please use courier or times new roman with 12 size font for all your assignments. |
| Total Available | Total Earned | |
? | 6 | 5.75 | ? |