Guillermo Furniture Store Scenario, Essay Example

How could Guillermo use budgets and performance reports in his decision-making process?

In each and every company, the use of budget reports and a performance report is of paramount for the success of a business. The budget report normally shows how a company is doing in terms of its finances. While a performance report shows how the business or the employees use their skills and experience to improve the aspects in question to make the company run well in the long run. Since both the performance and the performances report are essential in the running of the business, they can be used in decision-making.

According to Guillermo, the budget report could be used to identify the sales pattern of the product. To identify the sales figure that the product brings to the company and the present pattern in the market. He could also use the performance report to identify the strategies his competitors are using in the market. His competitors are using a high-tech approach to provide the furniture’s to exact specifications with rocky bottom prices.

Considering the increase in the cost of labour because of the plenty development in the region and the inexpensive housing, Guillermo could use the budget report in the identification of excessive spending or expenditures. After identifying the excessive spending, he could have a discussion in a performance report on how to make changes to reduce the spending to a minimal cost the way his competitors in the plant in Norway, used very little labour because of the availability of robots. The budget and performance reports could also help in identifying the planning product line. Guillermo could use it to know the wants of his distributors and how to network with them.

How might ethics influence his accounting decisions?

Ethics is essential for the company for both the company’s integrity and the trust of stakeholder in a firm. Ethics will influence Guillermo’s accounting decisions in a tougher manner. He will properly face an ethical dilemma at many issues to be decided when he is making the budget for high-tech decision-making process. If he prefers to use this high-tech production, he may be required to execute all his employees, which may seem to be an act of poor moral worth. Moreover, if he will feel exploring the market, as a broker will help him promote a foreign company, he may opt for that option from the consequential ethics perspective. In addition, he has to account for the profit he is going to generate from each and every method he will use. The accounting decision should not be in contrary to the rules of taxation, the estimated brokers cost, the labour rate, and the total calculation of overhead. On the other hand, if he chooses to use computer-controlled lathe, he has to give an outlay of the expected income and cost in that at some instance he might be tempted to overstate or underestimate the income. In the long run, he is required to follow ethical accounting practices in which if does not do so he will end up getting himself into trouble.

What accounting information is most relevant for Guillermo to consider when making a decision?

The accounting information that is most relevant for Guillermo to consider is the use of earning before tax. If he chooses to go for computer-controlled lathe, he has to make some additional investment. For him to pay low taxes, he will have to charge deprecation in the investment. In case of high-tech option and broker’s option, there will be increase charges of depreciation and the additional cost of capital incurred for acquiring the machinery will not be included in the depreciation cost. Weighted average cost of capital (WACC) can also be use to know the actual cost of investment.