Management accounting Assignment Example | Topics and Well Written Essays - 2500 words

Management accounting - Assignment Example Taking into account the advice given out by the proposals of the Function Managers there is a need for a partial overhaul of the companies working practice and corresponding adjustments need to be made to its business model with an overall aim of ensuring as smooth a transition as possible in the aftermath of the acquisition of the company by MAJORAIR. What should also be considered by the board is the long-term strategy of what market should be the focus in terms of both location (established versus expanding) and passenger type (low cost versus high end and discerning), as well as the risks posed by each of these approaches. In regards to the accounts for the season Winter 2011/12 Overall profitability for the season stands at ?148,201,205 It will be important to benchmark the overall profitability of the proposals against this figure to establish which offer would be the most attractive to the company. Another important figure to look at would be at which moment in the season the proposals meet the breakeven mark. There are two ways of looking at this figure. One is to look at which moment in time the costs are covered by simply deducting overall costs against turnover as a point in time (for example: costs are covered between months 3 & 4 and from that point on all revenue can be considered as profit.) Another is to deduct what percentage of each sale is allocated to cover the costs spread out over the entire season or year. Figures for the yearly turnover are not calculated in this analysis because of the uncertainty of passenger numbers for the summer months. In regards to Load Factor there is some room for improvement Gatwick – Washington (AM) – 77.97% Load Capacity (55.14% of total available seats) Gatwick – Washington (PM) – 88.44% Load Capacity (28.26 of total available seats) Gatwick – Boston (AM) – 79.44% Load Capacity (57.9% of total available seats) Gatwick – Boston (PM) – 84.5% Load Capacity (50.88% of total available seats) Gatwick – Seattle (AM) – 55.78% Load Capacity (34% of total available seats) Gatwick – Seattle (PM) – 77.57% Load Capacity (63.16% of total available seats) As the accounts stand there is a surplus that can be reinvested or paid out to shareholders as part of a dividend but before either of these can occur I will be analysing the proposals set by the Functional Managers in regards to an investment strategy. Some of them are long-term investments, several of them are speculative and some of them deal with short-term fixes. I will be assessing them on immediate changes to profitability, projected impacts of capital expenditure feedback (for both the immediate fiscal year and for long-term cost reductions through investments) and what impact each proposal has on the current business practice used by SMALLAIR. Network Management In the first instance, this is the proposal I would want to present to the board as I agree with the recommendations of the proposal in a number of ways. Firstly, the Washington PM flight is the most efficient at load