These controls can include having a standardized procedure for the preparation of the forecast budget or through the application of budgetary slack. The lower the slack management allows in the forecast budget, the greater the lower the variance that can be expected, in particular when the manager making the forecast has reputation at stake on the variance (Ibid). Reputation is an external driver, while ethics are an internal driver (Ibid). Therefore, a code of ethics should be implemented as a control to help define the ethical expectations that the company has for its financial managers. In the Guillermo Furniture Store situation, the variance from the budget forecast last year left the company with losses instead of profits. Consumers purchased more of the mid-grade product and less of the high-grade product than anticipated; the latter having much higher margins than the former. For the next year's budget, Guillermo senior management should approach the budget hoping to reduce the variance between forecast and actual results. For the next year, the budget should incorporate controls that force it to have a starting point of declining sales in the high-end product, as that has been the trend over the...
Increasing sales of the mid-end product should also be included. Management can be allowed some budgetary slack, however, if the company wishes to set a goal of stemming the sales losses in the high-end product. Doing this will increase the risk of variance, but this risk is known ahead of time and is understandable given the strategic objectives -- to some degree the forecast budget is based on strategic objectives as much as anything else. The slack points should be carefully defined, however, and the method of budgeting should remain consistent year-over-year so that the data can be gathered to improve the budgeting process in future years.
Guillermo Furniture Store is facing a difficult operating environment. The cost of labor -- a key input -- is increasing rapidly. The company is facing intense competition from a foreign competitor that has the ability to undercut Guillermo's low-end lines with better-quality goods. In order to save his business, Guillermo has sought out three different alternatives and is subjecting these alternatives to financial analysis. The results of the financial analysis
Guillermo has a number of choices and will have to decide whether to implement the same technology as his competitors (which will result in a decrease of employees, an ethical conundrum he does not wish to face). A different choice might be to parlay his distributor network for another competitor who wishes to expand its base, and a third choice might be to diversify his offerings away from the custom
Guillermo Furniture Store is facing a challenging operating environment. He is facing strong new competition that is threatening the company's margins and market share. The competitor is able to do this by utilizing state-of-the-art technology that allows the company to undercut Guillermo considerably on price, with a fairly low perception of quality drop-off in the eyes of the consumer. The second environmental challenge that Guillermo faces is that the cost
Guillermo Furniture Store Scenario organization, approval instructor, assignment Write a paper 2,000 words analyzes Guillermo's alternatives. Select alternatives justify recommendation discussing financial business advantages disadvantages solution vs. alternatives. The Guillermo Furniture Store Scenario The Guillermo Furniture Store is currently facing severe challenges from the external environment. As competition intensifies and as the forces in the micro and macro environments become more pressing, the economic agent is forced to reconsider its strategic
Gullermo Guillermo Furniture Store Analysis Situation Overview Guillermo's furniture manufacturing company is located in Sonora, Mexico which was formerly a quiet vacation spot but has undergone a significant amount of development including an international airport. The organization is the largest furniture manufacturing company in this area and has been manufacturing furniture for some time now. Although the company was profitable until the late 1990's, the industry began to change. The competition was composed
The basic premise of IRR is that if the IRR is higher than the discount rate, the project will be profitable over its life, whereas if the IRR is lower, the project will not be profitable. The IRR calculation is normally done in Excel, but can be rendered as The IRR for the patent coating option is 6.9%; for the automation technology it is 64.7%; for the brokerage option it
Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.
Get Started Now