Guillermo Furniture Store

Guillermo Furniture Store

Budget and performance reports are crucial in the decision making process of any given company. The budget set forth for the upcoming year can be calculated with the help of the current budget and performance reports. These reports allow the company to see unforeseen expenses and compare the actual numbers to the ones which were projected in the budget at an earlier time. This can help the managers of the company to take immediate action if in the event the revenues are lower than projected or the expenses are higher than projected (Horngren, et al, 2008 Chap 1). In the Guillermo Furniture Store Scenario, Guillermo Navallez, the owner of the company, is currently not sure what direction the company should be taken. The problem he faces is new competition that produces furniture at very low cost which allows them to sell at prices lower than Guillermo Furniture (University of Phoenix, 2008). In addition to this problem is the change to the city in which the company operates in. With the city developing and population rising, the cost of living is rising along with the wages which is rising up the cost of production for the product. The secret to the low production costs of the competing company is the automated production. They possess robotic machines which work around the clock with little supervision. This cuts labor costs dramatically which reflects on the overall production costs. Another competitor on in Norway may prove to be profitable due to opportunity it presents to Guillermo Furniture. This competitor only operates in Norway and has expansion in mind. If Guillermo Furniture store decides to focus on distribution, the company can buy from the competing company and distribute in North America at low costs. Mr. Navallez must decide whether investing in automated furniture production or focusing on distribution instead of production would best benefit the company. Budget and performance charts will allow him to have an idea of what kind of profits each decision will make and from there make the right one. The role of ethics in the financial reports which include the budget and performance reports are very clear. Any infraction or unethical doings in these reports can have hurtful repercussions on the company. Errors in the accounting books cannot be seen easily therefore will take some time before they are discovered. By the time they are discovered, usually it is too late to fix the error (Horngren, et al, 2008 Chap 1). In the case of Guillermo Furniture Store, the accounting data can make or break the company. If the accounting information has misleading information in it, it might cause Mr. Navallez take the wrong route and harm the company (Horngren, et al, 2008 Chap 1). As explained, the need for reliable accountants who have ethics in mind can make all the difference when faced with tough decisions.