Guillermo Furniture Store Scenario Essay

854 words - 4 pages


Guillermo Furniture Store

University of Phoenix

February 15, 2010

Guillermo Navallez is a successful custom furniture manufacturer in Sonora, Mexico. He is now faced with the decision of which direction to take his business, after a new international competitor entered the market and one of the largest furniture retailers opened their business in the community. These events caused a dent in his business as he was faced with falling prices and rising costs. Guillermo has several alternatives to consider in an attempt to offset these challenging events and keep his business afloat.
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The performance reports, particularly the income information will give him the comparative figures that he can expect to earn using the current method verses, the hi tech method and becoming a representative. In using the current method he can expect a net income before taxes of 46,118, if he chose to use the hi- tech method he can expect a net income of about 213,000 and if he decides to become a broker he can expect a net income of about 65,000. In order to make a decision Guillermo will need to consider the investment he will need to make for each option going forward, especially the hi-tech one. The production data for the flame resistant coating gives Guillermo the exact estimate of making flame resistant and fully treated furniture. A comparison of this estimate with the actual price can assist in realizing for the products
According to the Encyclopedia of Business and Finance, “ethics in accounting is of utmost importance to accounting professionals and those who rely on their services.” Ethics will influence Guillermo's accounting decisions in many ways. He will have to make accounting decisions when he prepares the budget for the hi-tech decision making process. He has to exhibit honestly the profits he is capable of earning under each method. The mortgage payment in particular makes his debt to equity ratio not favorable. He has to truthfully present his debt equity situation when he attempts to finance his hi-tech manufacturing option. Guillermo’s accounting decisions should be ethical and upfront with respect to taxation, the calculation of...

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