Guillermo Furniture Store Scenario


Guillermo Furniture Store

University of Phoenix

February 15, 2010

Guillermo Navallez is a successful custom furniture manufacturer in Sonora, Mexico.   He is now faced with the decision of which direction to take his business, after a new international competitor entered the market and one of the largest furniture retailers opened their business in the community. These events caused a dent in his business as he was faced with falling prices and rising costs. Guillermo has several alternatives to consider in an attempt to offset these challenging events and keep his business afloat.
After doing some research, and weighing his options, Guillermo knew that a merger is something he is not willing to consider; this leaves a few other possible solutions to consider which are: converting his production to the high-tech laser lathe which could be very expensive but would cut the cost of production dramatically; becoming a representative or partner with another Norwegian manufacturer, or continue focusing on his already patented process for creating a coating for his furniture.
In the decision making process; Guillermo must first look at the existing budget and performance reports. A budget is the quantitative expression of a plan of action which also helps to coordinate and implement plans and the performance reports provide feedback by comparing results with plans and by highlighting variances, which are deviations from plans (Horngren, 2008). The projected information can be used for labor hours and production value to assess the profits if the decision is made to sell coated furniture. The budgeted information will also assist him in assessing the profitability of the high end manufacturing that he plans on retaining if the decision is made to become a representative.   Guillermo will have a good estimate of the net revenue and net earnings from the budgeted net revenue if he sells the...