University of Phoenix
Guillermo Furniture Store Analysis
Guillermo Furniture store needs to understand what items will need to be reviewed and utilized to help achieve their organizational goals. They need to identify and understand the managerial reports and financial reports in order to make an informed decision as to what direction to steer the company. Decision making prerogatives for the manager will be determined through cost relationships and behaviors. Also, a control system and review of a break even analysis can be critical to determining expenses and revenues. They will help identify what will increase as sales increase, decrease, or not change at all. The company is now encountering competition and is considering expanding; therefore will need to utilize all these things to make the business successful.
Cost Relationships and Behaviors
Managers are required to make decisions about organizational resources in order to maximize the value of the firm. By understanding the theory and practice of cost management the managers of Guillermo will be able to make effective economic decisions. Cost behavior is the way in which a cost reacts or responds to changes in the level of business activity. According to Garrison, Noreen and Brewer “the ability to predict how costs respond to changes in activity is critical for making decisions, controlling operations, and evaluating performance. Managers are able to estimate the amount of costs that are expected to be incurred at different levels of activity when they are able to predict cost behavior. The primary function of managerial accounting is estimating costs which is the heart of budgeting and forecasting. In order to effectively plan a manager must be able to anticipate and if a cost can be expected to change and know how much it will change. It is a manager’s ability to recognize and measure cost behavior that helps to avoid... [continues]
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