Guillermo Navallez has made furniture for years near his Sonoran home. The area had a good supply of timber for the variety of tables and chairs produced by his company. Labor was also relatively inexpensive. In addition, he priced his handcrafted products at a slight premium for the quality they represented. Overall, life was good for Guillermo (University of Phoenix, 2009).   In 1990s two events combined causing a large dent in his business.   First, it was new competition from overseas entered the furniture market. Using a high-tech approach, this foreign competition provided furniture to exact specifications and did so with rock-bottom prices.   Second of the largest retailers in the nation opened headquarters in Sonora. Due to the influx in people and jobs, there are changes in labor and material costs which force Guillermo to rethink his strategy and try to stay in business (2009).

In order to aid Guillermo to make the best decision, the following issues will be addressed on how could Guillermo use budgets and performance reports in his decision-making process, how will ethics influence accounting decisions and what accounting information is most relevant for Guillermo to consider when making decisions.

First of all, the purpose of budgets and performance reports are to evaluate the manager performance.   Budgets help managers to coordinate to implement plan while performance reports evaluate and measure the results against the plan.   A budget is a quantitative expression of a plan of action Budgets also help to coordinate and implement plans. They are the chief devices for disciplining management planning. Without budgets, planning may not get the front-and-center focus that it usually deserves (Horngren, p. 13).   On the other hand, Performance reports provide feedback by comparing results with plans and by highlighting variances, which are deviations from plans (p. 13).   Guillermo can use budgets and performance reports to assist with his...