In today’s business world all the managers’ and business owners should understand and know the business concepts to make the best profitable financial decision for the business.
Guillermo’s Furniture Store
Guillermo Furniture Store is located in Sonora, Mexico, and owned by Guillermo Navallez. Guillermo was making good profit in his business by using the relatively inexpensive labor until new competitors arrived in the market. As it started to rise up the material cost and also the labor cost in the market, Guillermo was facing a decrease in his profit margin. In order to continue the business and compete with the new competitors in the market, Guillermo needs to use the budgets and performance reports for his business. By doing so Guillermo will be able to monitor the trends as well as make the financial plans ahead of time in his business. Guillermo has three options to choose from to make the best financial decision for his business: stay in manufacturing as is, high-tech solution, and broker out option. The figures in the provided data will help Guillermo to decide what changes he needs to make for the best alternative decision. In this paper the subject to discuss is how Guillermo make the correct business decision by using highest ethical standards, most relevant accounting information as well as the budgets and performance reports.
Budgets and Performance Reports
“There are two basic types of decisions within an organization: (1) planning decisions, and (2) control decisions.” In Guillermo’s case, he will use the planning decision by setting up the objectives for his organization and outlining how it will attain them (Burgstahler, 2008, p. 12). According to Burgstahler (2008), “Budget is a quantitative expression of a plan of action. Budget helps to coordinate and implement plan. Without budgets, planning may not get the front-and-center focus that it usually deserves” (p. 13). Performance reports provide... [continues]
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