Guillermo_Furniture_Store

Abstract Guillermo’s Furniture Manufacturing Company located in Sonora, Mexico. Area described as a beautiful vacation spot and a large furniture manufacturing location in North America (University of Phoenix, 2010). Guillermo Navallez was producing furniture for many years, area had a good supply of timber. Labor cost in the area was not expensive. In later 1990, new competitors entered the furniture business in area, which leads to decrees in furniture sell for Guillermo furniture. Competitors were able to produce furniture to exact customer specification with help of high-technology innovation, along with affordable price. As result of all changes in business and surrounding areas, Guillermo is facing tough decisions in increasing company profit, which alternatives better suite company future development. In this paper we will examine how Guillermo Navallez can use budgets and performance reports in his decision-making process. How ethnics principals might influence his accounting decisions and what accounting information on Guillermo decisions. Analysis of Different Alternatives for Company How could Guillermo use budgets and performance reports in his decision-making process Budgets and performance reposts can be used in several ways to help Guillermo Navallez with making professional decision. According to CICICUS: World Alliance for Citizen Participation (2010): A budget is a document that translates plans into money - money that will need to be spent to get your planned activities done (expenditure) and money that will need to be generated to cover the costs of getting the work done (income). It is an estimate, or informed guess, about what you will need in monetary terms to do your work (para. 11). Guillermo recognize management dilemma and need to answer tough questions such as if he should upgrade his furniture manufacture with newest laser lathe process, should he become a representative of Norway furniture manufacture and should he sell coated furniture. The budgeting information will help Guillermo make assess and calculate the profit, base on past performance and future expectation, if he is going to become a representative of the high end manufacture. If Guillermo decides to sell coated furniture, he can use available information for labor hours along with production value to make calculation of possible profit. By using income information, Guillermo can get comparative and relative figures that he can be expecting earn in future by using the current method, hi-tech method or become a representative. Using current method, Guillermo Navallez can expect income before taxes 46,118, using hi-tech method expected income before tax 213, 174, and becoming a broker expected income is 65,041. Before making any future decisions, Guillermo Navallez will have to look into amount of his investment for each of the options. Careful evaluation is needed for high-tech option. Upgrading manufactory with newly high-tech system could increase labor, as robots will be use instead of human operators for performing the exact movement in furniture assembly. However, this project accompanied with money risk. Flame resistant coating production data helps Guillermo to calculate costs of producing fully treated and flame resistant furniture. How might ethics influence his accounting decisions There are couple of ways that ethics will influence Guillermo accounting decisions. He will need to show honest profits, likely to be earn under each of the option. Equity ratio with big Mortgage Note Payable makes it is not favorable. "Correcting" debt equity would not be the honest way if Guillermo will decide to invest in high-tech option. Broker costs estimations, taxation, overheads calculation, production capacity and labor rate expectation another important area where accounting decision should be ethical. In case if Guillermo will decide to invest into hi-tech, he would need to lay off some of his employee, which would be seen by others as act of poor moral worth. What accounting information is most relevant for Guillermo to consider when making decisions Net income before taxes information is most relevant for Guillermo decisions on his three available options. Net income before taxes, needs to be compared with any additional investment he will make for each option, along with cost of capital. This would lead to necessity of comparing the additional net income before taxes that he will earn with additional cost of capital. Depreciation charges will increase if Guillermo will choose either broker option or high-tech option. However, depreciation for high-tech and broker options is the same and it is possible that additional costs of capital that may be charged for acquiring new high-tech machinery is not included in the depreciation cost.