GUILLERMO USE BUDGETS AND PERFORMANCE REPORTS

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

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

Guillermo's Furniture store is currently facing an unexpected increase in foreign competition which has put Guillermo in a tough position, forcing him to consider different alternatives for his business to survive. Guillermo has conducted research on his competitors' strategies to stay competitive in the market. This synopsis will help identify three key factors which will help Guillermo implement the necessary changes to his business in order to stay competitive. The four key factors that Guillermo has to consider are budgets and performance reports, ethics in accounting decisions and relevant accounting information. Budget and performance reports can be used in decision making in various ways. Here Guillermo has to decide which option is goof for them, manufacturing computer controlled laser lathe (high tech method) , representing manufacturer in Norway or selling coated furniture (current method).

If there are various options to choose from, the option which has potential to generate maximum profit is selected. Budget helps the company in estimating the expected revenue and expenditure and hence the profit from a particular option. Guillermo can use Budget and Performance report for decision making as follows:

Budget:

Guillermo can project labor hour required, product cost and expected revenue. This information can be obtained from budget. This will help them in assessing profitability. In case of all three options available to Guillermo, he can assess the net revenue he can expect and decide which option will be more fruitful for them.

Performance Report:

A project which is expected to maximum profit is not necessarily the best option. It depends on the risk involved, cost involved and other factors also. Performance report helps the company in comparing the options on ...