Wk-1 Guillermo - - Running head: GUILLERMO FURNITURE STORE...

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Running head: GUILLERMO FURNITURE STORE SCENARIO Guillermo Furniture Store Denise Tucci University of Phoenix ACC/561 December 7, 2009 Guillermo Furniture Store Guillermo Dilemma Guillermo Navallez, owner of Guillermo Furniture Store, is faced with deciding what direction to take his business. During the 1990s, two events caused a major dent in the income and demand for his custom furniture. A foreign competitor entered the market with lower prices on comparable furniture items. To compound this new problem, his town of Sonora, Mexico became the headquarters to the largest retailers in the nation. This caused an influx of people and jobs, which raised the cost of labor. Costs were raising and profits were dropping for Guillermo's business. Guillermo must figure out a way to survive these changes. Budget and Performance Reports Guillermo can use budgets and performance reports to aid in his decision making process. By using management accounting procedures, Guillermo can identify measure and analyze information to help him fulfill his business objectives. He needs to answer three questions using the accounting information. First, he needs to address whether the company is doing well or poorly. This is obtained by "scorekeeping." Scorekeeping is the process of accumulating and classifying the data collected. Data included in this process is usually a combination of income statements, balance sheets, cash flow statements, and income tax filings (Horngren, 2009). The second question Guillermo needs to address will help him focus on what problems need attention. Attention-directing questions are described as "reporting and interpreting information that helps managers to focus on operating problems, imperfections, inefficiencies, and opportunities" (Horngren, 2009). These reports are produced routinely in order to compare results that are actual numbers to the "before the fact expectations. II This report will help to explain why the business might not be achieving success with its budgeting. Thirdly, Guillermo needs to look at the alternatives available to him and determine which one is the best. During this problem-solving process, questions need to be actively investigated. Guillermo has an option ofusing a flame retardant coating to which he owns the process patent. This coating was actually being used as the finishing coat on his furniture, which later was discovered to be flame retardant. He has the option of possibly marketing the special coating, along with upgrading the technology used to produce his furniture as part ofthis third line of questions. Ethics One part of this decision that has caused Guillermo an ethical dilemma concerns the workers at his company. If he purchases technology that speeds up his production, then
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he must cut his workforce. This technology will cost less in the end, due to the increased production. Nevertheless, he cares about his employees and their families. The machinery he is considering can work 24 hours a day, where as his employees do not. Guillermo
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This note was uploaded on 06/13/2011 for the course ACCT561 SH2MB906 taught by Professor Nathanielmanning during the Spring '09 term at University of Phoenix.

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Wk-1 Guillermo - - Running head: GUILLERMO FURNITURE STORE...

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