The Guillermo Furniture Store Scenario
The Guillermo Furniture store has been a successfully ran business for quite a few years without any competition in the market area around Sonora, Mexico. The location has provided low living costs, low wages, and plenty of resources for a hand crafted furniture store, wood. However as technology advances, living expenses and wages increase throughout the world, the next manufacturer of furniture continuously looks for a better location to do business. And so, in moves a competitor of the Guillermo Furniture store that can make furniture quicker, less expensive, and keep their overall costs down. Guillermo Navallez must consider many factors when deciding on how he will compete with this new competition while keeping his original hand crafted furniture products available to his customers, and maintain low overhead costs. Considerations need to be addressed as to ethical accounting in order to make his company look financially competitive, how to use his budget and performance reports to decide if he should be a distributor for another company, and what accounting information is most relevant to consider when making his decisions. By answering these questions, Guillermo Furniture will be able to compete with any competitor and make a decision that will lead him to a successful future.
In making the decision on whether or not to be a distributor for the furniture business that is based out of Norway, Guillermo Furniture can use the budget and performance reports to see if he can still make a profit. Looking at the budget, Guillermo has budgeted pretty close to the actual expenses, however has actually spent more and under budgeted. Looking at these results, it would be easy for Guillermo Furniture to know that they will not make as much using their same techniques. Additionally, as the reports show that the rate of inflation climbs at 3%, sales growth is at 1%, which means that prices are going up and the demand for his items are not keeping pace. Therefore, the decisions to make some changes are inevitable as the data shows.
When approaching the new furniture manufacturer in Norway about wanting to become a distributor for them, Guillermo has some ethical record keeping decisions to make. Guillermo needs to be able to show the manufacturer that Guillermo Furniture has the capability to sell those items. Although Guillermo may have the dealers who could sell the items, the Norway manufacturer is going to want to see a forecast that shows positive sales numbers. Guillermo Furniture could easily alter the data in the reports to reflect that they have a larger profit margin and show a generous increase in sales over time. However that is an ethical question that Guillermo must answer. If Guillermo furniture shows the true reporting, then the Norway manufacturer may not accept the lackluster increase of sales or large enough market share to push Guillermo their products. However, if Guillermo furniture ???cooks??? their books, then they may get the deal with the Norway manufacturer, but the end result could be that Guillermo Furniture is not able to push the products, creating a loss of revenue to do products not selling.
The most relevant accounting information that must be used when making a decision will be the overall operating costs. Guillermo Furniture can see that the wages, materials, supplies, and utilities pricing are increasing. Yet Guillermo Furniture is only seeing a 1% growth if product demand. At the rate that Guillermo is going, the company cannot continue with the same practices that they have been using. Change must come, a decision needs to be made, and that will come from the overall operating costs.
Phoenix, U. o. (2010). ACC/561 ACCOUNTING; SUPPLEMENT: Guillermo Furniture Scenario. Retrieved MARCH 6, 2011, from University of Phoenix: https://portal.phoenix.edu/classroom/coursematerials/acc_561/20110301/