University of Phoenix
ACC 561 Accounting
Guillermo Navailez had many important decisions to make and a vast amount of information to process before moving forward after the events of the 1990's. The first was to analyze the marketplace and the second was to analyze the Guillermo Furniture Company. After finding his place in the marketplace, Guillermo then needed to make decisions base on data on whether is it was wise to continue. Computing measures of profitability and a break even analysis will determine weather or not this will be a feasible option. If the determination is to continuing operating, the control system will allow Guillermo Furniture to stay on track.
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If Guillermo stays with the relatively labor intensive than labor hours may be a good cost driver. If the company makes the large initial investment in high tech computer controlled laser then fixed costs will be much higher and machine hours or set up times may be a relevant cost driver. Costs behaviors will also vary based on the type of production, whether being mid grade or high end. Guillermo needs to have a good understanding of cost behaviors to make decisions that will be the most profitable. This is especially important because of the current need to potentially make some major changes in the company’s operations.
Choice of a Control system to achieve organizational goals
A management control system is a “logical integration of techniques for gathering and using information to make planning and control decisions, for motivating employee behavior, and for evaluating performance” (Horngren, Sundem, & Stratton, 2008, p. 386). The first component of a management control system is the organization goals. In the case of Guillermo furniture, the company has no intention of merging with another company to become more competitive like some of Guillermo’s competitors. To remain a strong, independent, profitable company Guillermo must a control system in place that ensures the entire organization is working toward unified goals. When designing a control system to meet these needs Guillermo must identify responsibility centers, develop performance measure, establish a monitoring and reporting structure, weigh costs and benefits, and provide motivation to achieve goal congruence and managerial effort (Horngren, Sundem, & Stratton, 2008).
A management control system with the above components will help the company stay on track to achieve organizational goals. As responsibility centers are set up a cost center will be especially important. A cost center will help management to understand cost behaviors in different departments, which will help the company to better control costs. Developing performance measures that focus on financial and nonfinancial are needed to have standards set appropriately. These measures are also needed to ensure employees are rewarded and evaluated properly. A control system will also monitor and report results, which is necessary to ensure goals are being hit, and if not adjustments can be made. Monitoring and reporting results leads us to weighing costs and benefits. The information gathered from monitoring and reporting need to be as accurate as possible so when used to weigh costs and benefits the best decisions possible can be made. Once decisions are made the control system must still be able to properly motivate employees and management through rewards. Rewards keep management and employees motivated to continually work toward achieving the organizations goals. Having a management controls system in place will help Guillermo achieve the organizations goals.
In an effort to make his product better,...