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1 Guillermo Furniture Store Scenario

Crystal Cheng ACC/561 July 4, 2011 Susan Hurley Guillermo Furniture Store Scenario

2 Guillermo Furniture Store Scenario Abstract The purpose of this analysis is to evaluate how budgets and performance reports influence the decision making process, consider the ethical dilemmas of each alternative, and using relevant information to help choose to the best solution.

3 Guillermo Furniture Store Scenario Guillermo Navallez is the owner of Guillermo Furniture store. After bringing his company to North America, his business began to suffer, experiencing heavy competition from other companies entering the market. During the peak of his success, the competition put a damper on profits, forcing Guillermo to reduce prices even with increasing costs. Guillermo has several options to ease his situation but despite the downturn in business, he did not like on the idea of a merger or acquisition from larger corporations and did not want to expand his management responsibilities. He wants to continue operating his business as normal to ensure his family and personal life is not interrupted. Budgets and Performance Reports Guillermo will use budgets and performance reports to assist in his decision making process. Managing accounting procedures will allow Guillermo to identify, analyze, and measure data and information to fulfill objectives and meet company goals. Budgets and performance reports will provide information to help Guillermo determine how his business is performing. Retrieval of data will come from balance sheets, income statements, statements of cash flows, and income tax statements. Analyzing reports will allow Guillermo to focus on problems and issues that needs attention, explaining reasons and causes of why his business is not meeting expectations and not achieving success. Budget and performance reports will also allow Guillermo to weigh his alternatives. He has three alternatives to analyze. The first option is to keep

4 Guillermo Furniture Store Scenario business operations as normal and remain independent. The second option is to invest in high tech machinery to enhance production efficiency. The third option is to partner with the Norwegian company that will change focus from manufacturing to distribution (University of Phoenix, 2011). Analyzing reports will help Guillermo evaluate the advantages and disadvantages of each alternative and to choose the best option to enhance the performance of his business. Business Ethics Ethical dilemmas and events will arise in the organization. Investing in high tech machinery will enhance production efficiency, however will force Guillermo to layoff a portion of his workforce. High tech machinery is a costly expense and will require a reduction for labor, but because the machines can run on a 24 hour basis the production efficiency will offset the labor reduction. High tech machinery will also decrease production costs but the ethical dilemma Guillermo will need to evaluate are layoffs. Guillermo is a family man and values his quality time. He will need to consider the effects of layoffs and how it will affect his employees and their families. Relevant Accounting Information Guillermo will analyze accounting statements and determine what information is relevant for his decision making process. According to Horngren, relevant information is the predicted future costs and revenues that will differ among the alternatives (2009). The decisions Guillermo makes will not change events in the past but will affect events in the future. Using relevant accounting

5 Guillermo Furniture Store Scenario information to evaluate the predicted outcomes of each alternatives outcome will help Guillermo choose the best option for his company. Conclusion A downturn in business forces Guillermo to evaluate his current business approach and evaluate his alternatives. To evaluate each alternative, he will use budgets and performance reports, consider the ethical dilemmas each alternative may pose, and use relevant accounting information that predicts future costs and revenues. Guillermo will weigh the advantages and disadvantages of each alternative and make a decision to choose the best option to bring his furniture business back to success.

6 Guillermo Furniture Store Scenario References Horngren, C.T., Sundem, G.L., Stratton, W.O., Burgstahler, D., & Schatzberg, J. (2008). Introduction to management accounting (14th ed.). Upper Saddle River, NJ: Pearson Prentice Hall. University of Phoenix (2011). Guillermo Furniture Store Scenario. Retrieved from https://portal.phoenix.edu/classroom/coursematerials/acc_561/20110628/

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