Guillermo Furniture Store Scenario
June 04, 2011
Guillermo Furniture Store Scenario
The Guillermo Furniture Store was successful at their manufacturing plant in Sonora, Mexico in the 1980s. However, within a decade the company had competition internationally. Also, a large retailer opened headquarters in Sonora where Guillermo leading manufacturing plant is located. Thus the changes occurring surrounding the Guillermo company created an increase of costs in labor and material. Thus, causing profits margin to reduce at the Company. To stay at a successful business pace, Guillermo had with three options: have automaton production, become a distributor or set apart its product(University of Phoenix, 2009).
Before deciding which option to undergo Guillermo must consider budgets and performance reports and how they can are used in the decision making procedure. Also Guillermo must take in to account of ethical and unethical ethics influences in accounting decisions. Finally Guillermo needs to know what accounting information is best when implanting the decision process. Planning and control are the two decisions that the company needs to undergo.
A budget is a numerical countenance that is planned. A performance report entails feedback of comparative results, and also highlight its variances (Burgstahle et al, 2008, p. 10). Guillermo can use budget and performance to be very helpful. If Guillermo chooses to sell the retardant stain the company can compare its cost of product value and labor to forecast a more profitable income. Budgeting can also be an option to use when determining the profit by becoming a distributor.
Performance reports can ensure proportional numbers the company is up against. Using the income information report, the company has calculated the expected net income before taxes
???The purpose of ethics in business is to direct business men and women to abide by a code of conduct that facilitates, if not encourages, public confidence in their products and services??? (Smith & Smith, 2003, para.15). To have a successful business Guillermo must also do what is ethically right for the company. If the company decides to convert to automation then Guillermo will need to cut employees since the positions will be outsourced. This decision will increase net income. However, Guillermo leave several personnel unemployed resulting in an ethically dilemma. Thus, if Guillermo becomes a distributor the company has another ethically dilemma by endorsing foreign products other than Mexico.
The most relevant information for the company ???is the predicted future cost and revenues that will differ among the alternatives??? (Burgstahle et al, 2008, p. 198). After reviewing the income information report, the company uses the absorption method. The absorption tactic ponders direct and indirect manufacturing costs (Burgstahle et al, 2008). Variable and fixed costs behave differently and also have major effects on some decisions. Thus, variable and fixed cost affect differently. Guillermo needs to consider the net income before taxes and the cost of capital that has to be acquired for the investment. Plant overhead would increase substantially with the hi-tech option. However, Guillermo would increase its profits by having the highest income. The Guillermo Factory Store simulation was an example on the issues business face. By obtaining as much information and using accounting reports, a business can make a solid decision.
Burgstahler, D., Horngren, C.T., Schatzberg, J., Stratton, W.O., & Sundem, G.L., (2008). Introduction to Management Accounting (14th ed.). Upper Saddle River, NJ: Pearson Prentice
Smith, K.T. & Smith, L.M. (2003). Business and accounting ethics. Texas A&M University.
Retrieved April 8, 2009, from http://acct.tamu.edu/smith/ethics/ethics.htm.
University of Phoenix. (2009). Scenario: The Guillermo Furniture Store. Retrieved April 8,
2009, from University of Phoenix, Week One, ACC561.