TABLE OF CONTENTS INTRODUCTION...........................................................................................................................1 Providing the report regarding the profitability of the business.................................................1 CONCLUSION................................................................................................................................3 REFERENCES................................................................................................................................4
INTRODUCTION Management accounting plays an important role in the life of managers. Manager uses the different provision of management accounting to take better decisions and inform themselves inside the organization. It overlooks all the events and happening inside the management. To make short term and long term decisions, managers requires accurate and timely financial and statistical information which is obtained from the management accounting. The monthly and weekly reports of organization is being made by managers for internal audiences like department managers and CEO. This report is based on the case situation of Louise Fairbern, who is involved in the business of window treatment fabrication business. The present report will provideanalysisofprofitabilityofcustomers,totalprofitabilityanddistributionchannel profitability of the needs of customers. The present report will provide the analysis of the peer businesses of the Louise Fairbern. MAIN BODY Providing the report regarding the profitability of the business. Louise Fairbern have two business naming architecture firms and commercial treatment business. Both the businesses have different clients. The Adams and Betz are the client of architecture firms and Chatham, Dedham, Elm are the clients of commercial window treatments business (Quattrone, 2016). The Louis Fairbern wanted to evaluate the profitability of its both business individually and combined as well.To calculate the profitability of their business, following evaluation has been done. Architecture-firmwindow-treatment business Over all profi tabili ty AdamsBetzTotal Chatha m Dedha mElmTotal GROSS REVENUE234000188800422800357380147840 732 00578420 1001 220 3404 00 1
Less: discount2340023400 366 03660 2706 0 8510 0 net revenue210600188800399400357380147840 695 40574760 9741 60 1361 60 less: direct cost147000117200264200218400115720 570 40391160 6553 60 2212 60 GP636007160013520013898032120 125 00183600 3188 00 0 1191 40 less overhead cost4680538295851008412734802 172 31136160 2212 60 2212 60 General expenses5031168829 1191 40 1191 40 Net profitability3478967331 1021 20 Louise Fairbern have the two business naming architecture firms and commercial treatment business. Both the businesses have different clients. The Adams and Betz are client of architecture firms which have profitability of $63600 and $71600. While, the second business of Louis Fairbern is of commercial window treatment business whose overall profitability is $102120.TheindividuallyclientofsecondbusinessareChatham,Dedham,Elmwhose individual profitability is $138980, $32120 and $12500. Comparing both the businesses, it is obtained that the second business which is of commercial window treatment has more profit. It has three clients Chatham with the profit of $138980, Dedham with the profit of $32120 and Elm with the profit of $12500. Among all three clients, the Chatham has in the higher profit than others (Fullerton, Kennedy and Widener, 2014). The company should retain this client in order to earn more profit from it. Talking about the first business that is of architecture firm it is said that overall, this business is in profit. The business has two distribution business Adam and Betz which have the profit of $63600 and $71600, respectively. Comparing the profitability of these two distributions, 2
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it is observed that Betz is in the higher profitability of $71600 than Adams. The organization should retain this client so that more and more profit can be earned (Tappura and et.al., 2015). The overall profitability of both business is $102120. The reason behind growth of business is that company have strong margins and also had a cash to deal with day to day expenses of the business. Louis Fairbern have to improve more on those clients and distribution channels which have less profitability. It includes the following- ï‚·Preparation of strategic plan for the goals of one, three and five years. ï‚·Identify the success of factors like sales, expense, prosperity, growth, productivity Implementation of the budget (Ax and Greve, 2017). ï‚·Try to seek input from external environment. ï‚·Try to set benchmark of revenues and overhead percentages to leaders of industry (What is Budgeting?,2018). ï‚·Development of cost accounting system to identify the exact cost of delivered service of products. ï‚·Do the surveys of clients and customers in order to take feedback (Otley, 2016). CONCLUSION From above report, it can be concluded that management accounting plays an important role in decision making. Decision making is an important criterion which is to be done in every business. Therefore, it is to be done with the help of management accounting.In the above report, it is demanded to identify profitability of businesses of Louis Fairbern which have been done by the help of income statement. The present report has discussed about both businesses of Louis Fairbern which are architecture firms and commercial window treatment along with their profitability. 3
REFERENCES Books and Journals Ax, C. and Greve, J., 2017. Adoption of management accounting innovations: Organizational culture compatibility and perceived outcomes.Management Accounting Research .34. pp.59-74. Fullerton,R.R.,Kennedy,F.A.andWidener,S.K.,2014.Leanmanufacturingandfirm performance: The incremental contribution of lean management accounting practices. Journal of Operations Management.32(7-8). pp.414-428. Otley, D., 2016. The contingency theory of management accounting and control: 1980–2014. Management accounting research .31. pp.45-62. Quattrone, P., 2016. Management accounting goes digital: Will the move make it wiser?. Management Accounting Research .31. pp.118-122. Tappura, S., and et.al., 2015. A management accounting perspective on safety.Safety science .71. pp.151-159. Online WhatisBudgeting?.2018.[Online].Availablethrough:< https://www.mymoneycoach.ca/budgeting/what-is-a-budget-planning-forecasting>. 4