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Essay / Research Paper Abstract
This 3-page paper provides answers to Guillermo Furniture's potential expansion, based on studying the company's accounting. Bibliography lists 2 sources.
Page Count:
3 pages (~225 words per page)
File: D0_MTguilfurn.rtf
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Unformatted sample text from the term paper:
overseas competitors that could also manufacture custom furniture at a lot less cost. The combination of competition and an increase in labor costs were eating away at Guillermos profit margins.
Guillermo decided his best route was to possibly become a distribution chain for another furniture company in Norway (where the first company
is based). In this way, Guillermo could become a distributor while retaining some of his high-end custom work. On the other hand,
Guillermo had a potential product that could help with his profit margins; a stain-resistant and flame-retardant coating. The market is likely to embrace the flame retardant coating, but isnt likely
to be too thrilled about the other types of coatings available. The question we ask ourselves is whether this move is
financially viable. We can examine Guillermos accounting information. Studies have shown that basing strategic decisions on accounting information ends up creating more profitable firms (Dong et al, 2009).
On Guillermos balance sheets, the set-up costs on the income statement alone show an interesting scenario - despite the fact that expenses would be
obviously less if Guillermo decided to go the broker route, his profits (and profit margin) would be greater if he decided to market the furniture with the coatings. However, in
examining Guillermos budget, there are some things that make the scenario of becoming a distributor much more attractive. For one thing,
the estimated units budgeted (and the actual units made, meaning actual units sold), had a fairly wide variance (though the mid-range items did break even in this scenario). However, the
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