Guillermo Furniture Store

Guillermo Furniture Store - GUILLERMO FURNITURE STORE 1...

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GUILLERMO FURNITURE STORE 1 Guillermo Furniture Store Fred Johnson/Kelly Boso ACC/561 June 16, 2010 Dr. Gary Bell
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GUILLERMO FURNITURE STORE 2 Guillermo Furniture Store Guillermo Navallez is the owner of Guillermo Furniture Store (GFS) located in Mexico. Currently, Navallez furniture business is threatened by technological advancement of his foreign competition and growth of the local economy. Navallez competitors are producing better quality furniture and selling this furniture at a lower price. Guillermo Furniture store profits are shrinking whereas the cost of labor is increasing (Apollo Group, 2007). Navallez have important decisions to make concerning operational, financial, and production activities to ensure companies achieve its’ goals. If GFS wants to be successful, the managers must be able to manage the cost behaviors and drivers. The managers will have to identify the relevant cost drivers to minimize the costs within the company. These managers will need the relative cost information to make effective decisions. The relative cost information for GFS are the materials, labor, and various overhead cost. A better method for GFS to use to get an analysis of current cost is the cost-volume-profit analysis. The cost-volume-profit analysis “is the study of effects of output volume on revenue, expenses, and net income” (Horngren, Sundem, Stratton, Burstahler, & Schatzbert, 2008, p. 54). This analysis will assist managers in predicting the production levels of furniture and have an estimation of the related cost to ensure the company is profitable in production. Managers can control cost more efficiently by understanding the cost behavior in relation to the production level of furniture. Cost behavior is “how the activities of an organization affect its costs” (Horngren et al., 2008, p. 46). The production level of furniture is the cost driver for the cost of materials in GFS. In other words, the amount of raw materials the managers need to purchase is driven by the quantity of furniture
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This note was uploaded on 04/14/2011 for the course ACC 561 taught by Professor Cole during the Spring '09 term at University of Phoenix.

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Guillermo Furniture Store - GUILLERMO FURNITURE STORE 1...

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