Guillermo Furniture Store Paper
The majority of companies today are facing the same challenges as Guillermo Furniture Store. Guillermo examined the impact of an expanding local economy and observed opponents and current equipment manufacturing the identical furniture while sustaining economical costs (University of Phoenix, Guillermo Furniture Store Scenario, 2010). Enhancements in robotics and machinery, alongside decreasing costs and higher production standards have generated a progressively more competitive furniture market throughout the world. Guillermo Furniture should use budget and performance reports to evaluate and collect useful data to determine what accounting information ...view middle of the document...
Recognizing how a cost responds to a change in the level of activity makes it effortless to produce a budget, organize a forecast, and decide how much profit a new product will generate (Horngren, Sundem, & Stratton, 2008).
The more distinguishable and distributable a cost is, the more superior when time approaches for accountants to perform their jobs. “Costs are primarily allocated into four groups, service departments, producing departments, products and services, and customers, as well as being broken down into direct and indirect costs” (Horngren, Sundem, & Stratton, 2008, p. 392). Managers can begin to observe the cost relationships and how they behave in each of their departments or situations once costs have been allocated. Therefore, managers must keep track of the costs of products and services.
In addition to the above, Guillermo Furniture must monitor their service and producing departments; particularly because they can add to the costs of the products and services. It is imperative to ensure that consumer profitability and costs are being scrutinized. Managers will then be able to establish the cost drivers after monitoring the company costs over a period.
Another important aspect for Guillermo Furniture Store is to encompass a management control system. A management control system is used for “gathering and using information to make planning and control decisions, for motivating employee behavior, and evaluating performance” (Horngren, Sundem & Stratton, 2008, p. 386). This system defines and communicates Guillermo’s goals, ensures that the managers understands what it takes to attain those goals communicates results to employees, and motivates the managers and employees to achieve those goals. Understanding and evaluating budget decisions to pursue new investments or machinery is beneficial to any organization. Incremental analysis is one way that Guillermo can improve his decision-making skills
Budget and Performance Reports have the potential to be used by Guillermo in a variety of ways. First, budgets represent valuable information. Using the information acquired from the budget reports, Guillermo could make better business decisions based on the inflow and outflow of monies. Monitoring a budget throughout a fiscal year to ensure compliance would enable Guillermo to forecast and predict, what expenditure if any, the company could take to increase profits, productions, or sales.
Control Systems to Achieve Organizational Goals
Managers should follow the management control system after it is implemented and continuously adapt all the essentials and revise as needed. The management control system is based on Guillermo’s business goals. Goals are measured, monitored and reported and managers adapt and revise to the changes as needed. Because of high competition, Guillermo decides to opt for the distribution-method. Without the addition building and high-tech equipment, the furniture store sees a...