Guillermo Furniture Store Scenario

Guillermo Furniture Store Scenario

Accounting is a daily function in many areas in our lives. Whether it is budgeting in our homes, or business, accounting services are useful and necessary. Guillermo Navallez has a very successful furniture business near his home in Sonora, Mexico. In the 1990's Guillermo's business was facing new competition. Rising costs and falling prices were causing Guillermo's profit margin to shrink (University of Phoenix Guillermo Furniture Store Scenario, 2011). In this paper discussion topics will include how Guillermo can use budget and performance reports in his decision-making process, how ethics can play a role in the process, and relevant accounting information in the decision-making process.

Budget Reports

Budget reports help control spending. The definition of a budget is "quantitative expression of a plan of action" (Horngren, Sundem, Stratton, Burgstahler, and Schatzberg, 2008). Using a budget report, Guillermo can keep track of all business expenditures. The budget report can also reflect if there is any excessive or wrongful spending. Budget reports are also relevant accounts for business earnings based on product sales. Guillermo can have an idea of which products are best sellers versus those products that are not doing so well allowing him to make any necessary adjustments to his inventory.

Performance Reports

"Performance reports provide feedback by company results with plans and by highlighting variances, which are deviation from plans" (Horngern, Sundem, Stratton, Burgstahler, & Schatzberg, 2008). Guillermo can use performance reports to help him set goals for his business. Performance reports reflect useful information collected over a certain time frame. Guillermo will be able to determine if goals are met, by looking at the projections and comparing them to the result. From there, decisions can be made regarding spending.

Ethics

According to Horngren, Sundem, Stratton, Burgstahler, and Schatzberg, "Ethics is the field that deals with human conduct in relation to what is morally good and bad, right and wrong. It is the application of values to decision making. These values include honesty, fairness, responsibility, respect, and compassion". If Guillermo wants to compete with the competition currently threatening to put him out of business, he clearly has some ethical business decisions to make. He may have to consider cutting down his workforce replacing them with high-tech robotics. If the decision is made, Guillermo knows the impact it will have on his employees and their families in their tight knit community. Maintaining honesty and integrity in explaining to his employees why such measures are necessary is paramount. Guillermo will have to explain how