Case Study

1. Budgets and performance reports are two essential elements in the decision-making process. Managers use budgets as a planning tool for disciplined planning. Additionally, budgets are used to coordinate and implement plans. Performance reports however, are tools to compare actual results to actual plans. Furthermore, performance reports are used to evaluate the effectiveness of a plan by highlighting variances or deviations from the plan. Performance reports allow managers to focus on areas of concern by highlighting the deviations from the initial plans set by an organization. Guillermo could use budgeting to prepare for the shift from manufacturing to distribution. Furthermore, Guillermo could use budgeting to analyze competition and analyze the current market. Guillermo could use performance reports to evaluate the plan he initially set for the month of June, and reevaluate plans for the following months. For example, during the month of June, Guillermo had a variance of (102,887) in the high end revenue. However the mid-grade variance was 102,818. Therefore, an area of focus for Guillermo would be on the high end. Focusing on the performance reports will allow Guillermo to adjust the budgets for the future to maximize efficiency and mange production cost.

2. Managers are often impacted by ethical decisions in accounting. Additionally, ethics often forge the direction of business by influencing managerial decisions. Ethics will influence Guillermo accounting decisions on several levels. For example, Guillermo will need to focus on integrity when reporting profits as well as losses. Guillermo will need to operate with integrity to benefit the company and satisfy the stakeholders. Ethics will further influence Guillermo’s accounting decisions by affecting the forecasting of future profits. To operate the business ethically, Guillermo will need to justify forecasting future profits. Furthermore, accounting decisions made by Guillermo