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Guillermo furniture is in a financial bind and they need to figure out what corners can be cut while still maintaining the quality product the reputation was built upon. The cost savings measure best suited for the company will be in the consumption and/or preservation of the flame retardant chemical. The break-even with the fixed costs is approximately 1200 units and 2300 factoring variable costs for the total units shipped. This is a high number so the amount of chemical used needs to decrease to negotiate the quantity down as well. This concept must be carried out through all aspects of the company starting with the employee motivation. Inclusive of this program will be a vision statement and morale based programs to drive employee ownership in the cause to survive.
Guillermo Furniture Store
Guillermo must make decisions for the company in order to achieve the organizational goals. This paper will explain the importance of Guillermo determining the cost behaviors of the company and how to analyze each cost. Once Guillermo understands the cost behaviors, than he can use organizational behavior as a tool to help the company follow through on projected goals. Guillermo will also have to compute the investments and current revenues and compare them with the option of selling flame retardant separately.
In order for Guillermo to make effective decisions for the company, he must understand what his cost relationships and behaviors are. He can start buy understanding the company’s fixed cost, mixed, variable, and step costs. These costs are the activities that affect how the company is operated. To determine cost, Guillermo first has to determine the company’s fixed cost. According to Horngren, Sundem and Stratton (2008), “A cost that is not immediately affected by changes in the cost-driver level” (p. 48). The fixed costs for Guillermo are labor wages, office salaries, benefits, office supplies, utilities, insurance, and…