Guillermo Furniture Store Scenario

Guillermo Furniture Store Scenario
Gracie Harris
ACC 561
November 11, 2010
Professor Nathanial Manning

Guillermo Furniture Store Scenario
Guillermo’s Furniture is a company in Sonora, Mexico.   At first Guillermo’s business was very prosperous because his handcrafted furniture’s prices were at a slight premium for the quality it represented (University of Phoenix, 2010).   Everything was going fine for Guillermo until the late 1990s.   First, a new contender from overseas entered the furniture market using a technologically approach and very low prices (University of Phoenix, 2010).   Second, the people of Sonora became aware of this new competition and this caused an expansion (University of Phoenix, 2010).   Thus Guillermo lost profit, and the cost of labor became high.   Guillermo must determine a way to endure these changes and he can do this by using budget and performance reports in his decision-making process.   Using outstanding accounting information is pertinent for Guillermo as well as the aspect of how ethics can influence his accounting decisions.
Budget and Performance Reports
Budgets help to arrange and carry out current plans.   Budgets are the most vital strategies for disciplining management.   A budget is a quantitative look of a plan of proceedings and without budgets, planning may not acquire the important focal point that it usually warrants (Horngren, 2008).   For both short and long-term systems, Guillermo can use these budgets to aid with his decision-making.   He can also use this information to calculate the return on investment and return on equity for his business.   Finally, Guillermo can use budgets from previous years to execute an analysis to maybe cut costs or find opportunities for improvement.
Performance reports grant feedback by comparing outcomes with plans and by accenting variances, which are different from previous plans (Horngren, 2008).   Performance reports contrast results to budgets, thereby encouraging managers to...