Analyzing Ryanair's Performance Impacts with Management Accounting

This assignment aims to investigate the use of various accounting systems, costing techniques, and reporting methods to evaluate the net profitability of Ryanair. By examining factors affecting its performance, students will identify areas for improvement and provide recommendations for enhancing sustainability and growth opportunities.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Concept of management accounting and their essential requirements.................................1
P2: Different types of methods use for accounting reporting.....................................................3
M1: Benefits of using management accounting system..............................................................4
D1: Critical analysis of management accounting reporting........................................................4
TASK 2............................................................................................................................................4
P3: Calculation of cost per units by using costing method.........................................................4
M2: Apply use of outcomes calculated by using net profitability..............................................6
D2: Interprets data for a range of business activities carried by Ryanair...................................6
TASK 3............................................................................................................................................7
P4: Advantage and disadvantage of using planning tools in budgetary control.........................7
M3: Analysis of planning tools...................................................................................................8
D3: Critical evaluation of financial problems.............................................................................9
TASK 4............................................................................................................................................9
P5: Comparison of financial problem those are arise in Ryanair with Lufthansa airline...........9
M4: Critical evaluation of financial problems..........................................................................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
In present scenario, it has been seen that plenty of accounting related aspects are needed
to be taken into consideration. This can be meeting by using effective management accounting
system. It will be essential for every department of an organization to make use of systems in
order to record various transactions that are being done in an accounting period of time. This
project report is providing crucial information regarding performance of Ryan air’s business
during the period of time. In order to analyse their internal and external stability various types of
accounting system and reporting are taken into account. By the help of costing methods net profit
of an organisation can be determine in more effective manner. Understanding of merits and
demerits of planning tools use in budgetary control. Discussion about certain financial issues that
are present in cited company and valuable measure to resolve them are mentioned under this
report (Hilton and Platt, 2013).
TASK 1
P1: Concept of management accounting and their essential requirements
According to mentioned case study about Ryanair which responsible for providing
effective services to passengers in airline facilities in Ireland and UK. It has been found that this
company is operating as full services conventional airline which is having two different kinds of
seating and three types of aircraft. There are certain kinds of issues which are found in an
organisation which is related with the internal management. They are not able record their
transaction or passengers detail or other crucial information that are done during the time. In
order to resolve all these issues, they are decided to hire accountant consultant so that certain
specific tools or techniques can be identified to analyse financial transaction of Ryanair.
Management accounting is simply said to be management of accounting statements that are done
by the company during their operational process (Ward, 2012).
The primary objectives of using this system are to attain individual as well as organisation
aims at the same point of time. Company always tried to increase efficiency and profitability by
using appropriate management accounting techniques. It is essential to make analysis of various
statements before transferring it to prepare valuable report for an organisation. This will be
helpful to make use data for evaluation current performance as well as producing more reliable
outcome for the company with using all resources that are being kept by the company. In every
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business enterprise, whether related with retail or services sector, they need to have more
effective system that can assist an organisation to manage their day to day expenses of a firm.
Management always look for all aspects which are necessary for increase productivity as
systematic record of internal department in “Ryanair Company”. It is vital for the managers to
make use of appropriate tools and techniques which are use for the purpose of effective decision
making in coming time (Burritt, Schaltegger and Zvezdov, 2011).
Management is said to be held responsible for effective planning, organising,
communicating and providing right direct to the company to increase maintain their goodwill in
more effective manner. While accounting is one of the main aspect which deal with recording of
financial transactions that are being done by the company during the time. In order to manager
them, they require certain types of accounting systems so that more valuable results can be
attain. Some of them are discuss underneath:
Cost accounting system: It happens to be essential aspects by which a Ryanair company
can more easily be able to locate and examine their actual costs that are incur over the production
of goods and service during the time. These types of costs make huge impacts on overall
production either directly or indirectly. There are certain types of costs that are needed to be
taken into consideration are normal, standard and actual costs.
Inventory management system: All crucial detail about operating costs among lowest
of any European scheduled passengers in airline are mentioned under this system. This will lead
to determine all detail about total raw material and resource which are needed to make aircrafts
are mention in this particular system. By using these systems, managers can able to analyse exact
among to stock they have to manage overall resources of an organisation (Soin and Collier,
2013).
Price optimisation system: As per this accounting system, various types of prices those
are set by the company for the passengers to book tickets for the purpose of travelling in one
destination to another. This will help to determine perception of customers about various prices,
whether they are able to pay for their services would be prime concern for the company. By the
help of this system they are able to analysis necessary data about various customers.
Calculating job costing: In order to track total costs a company is investing for the
purpose of producing valuable outcomes for the company are recorded into this particular
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system. This would have required more extensive observation and recording of costs and make
use of internal resources of an organisation.
P2: Different types of methods use for accounting reporting
It has been determining after making valuable analysis of Ryanair overall financial position
that they not having valuable amount of systems to maintain and record various accounting
transaction that are being done during the time. This seems to be utmost important aspect for the
company because all necessary decision is taken on the basis of using reports of Ryanair. This
report is said to be detail document which is prepared by using valuable information about day to
day expenses that are done by the company. The primary sources of collecting data for the
preparation of accounting report are taken from various departments such as marketing,
financing and operational level (Van der Stede, 2011). It is the primary role and responsibility of
managers to make use to data that are more reliable for effective management of Ryanair service
delivery done during the time. They need to record all crucial information about internal as well
as external detail information about financial data that are incur during the period of time. There
are various types of reporting system those are helpful to evaluate overall performance of
Ryanair business operations. Some of them are discuss underneath:
Performance report: This seems to be one of the primary report which is needed to be
prepare by managers of Ryanair service industry to determine overall performance of staffs that
are responsible for delivering services to the customers. This report is based on actual and
standard performance which is taking from past as well as current time performance. In order to
do so, accountant need to make use of key performance indicators to analyse performance by
making comparison among past data.
Inventory management report: It has been considering as primary tools for the
management of Ryanair to analysis and record all crucial data about current information about all
equipment or tools those are required in formulating of aircraft. Manager uses to keep record of
opening and closing data about the company that are done during the time. In order to manager
them, various types of stock controlling tools are needed to be taken into account such as
inventory turnover ratios, ABC costing and Economic order quantity level.
Account receivable report: As per this kind of report company would be liable to
collected complete list of all those customer’s invoices those are remain unpaid after making
booking of tickets during the time. This would require making analysis about total payment that
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is overdue for the payment. Actual time period to recovery the amount are examining by this
report in easier manner.
Operational budget report: Budget is an important tool which is needed to be taken into
consideration. This is prepared by Ryanair Company to determine total costs and expenses they
are investing in delivery services to an organisation. This kind of reports are basically said to be
more valuable for the company which are helpful in recording sales, productions and allocation
of resources and consumption of raw material during production of aircrafts (Banerjee, 2012).
M1: Benefits of using management accounting system
It has been notices that larges services making organisation are mostly using more accurate
and reliable system that can assist in recording of data in more systematic manner. The data can
be recorded by using data according to the time when transaction is being made. By doing so,
various chances of errors those are affecting profitability of the company can be reducing in by
using this accounting system. By the help of cost accounting system, they are able to control all
costs that incurred during an accounting period of time. Whereas inventory management systems
can assist them to regular and manage total level of stocks that are being kept by Ryanair. Price
optimisation will help them to decided which pricing level would be more suitable enough for
the customers in case they are using services of the company.
D1: Critical analysis of management accounting reporting
According to the above mentioned various types of reporting systems, managers of
Ryanair can easily be able to evaluate or record transaction in more effective and systematic
manner. This can be examining that all of them are held responsible for incurring maximum
return for the company within a short span of time. In case they are using accounting reporting
method such as performance report of all staffs and airhostess those are responsible for providing
services to various passengers can be analyse in effective manner. While account receivable
reports used to analyse total list of unpaid customer’s invoices that are remain outstanding for
long time are analyse effectively.
TASK 2
P3: Calculation of cost per units by using costing method
Cost are said to be one of the major concern that are needed to be kept by the company
while computing total net profitability for Ryanair Company. It has been seen in the mentioned
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scenario that Ryanair is being low cost airlines which cannot be determine feasibility to offer
free meals during boarding. There are certain issues found from passenger side that board
desirous of food required to buy it. By keeping specific demand of their customers, Ryanair has
currently introduced Ryan Economical in certain destination flights. In every business cost is
playing an eminent role during manufacturing of products and service during the time. This
seems to be an effective aspect for an organisation to make use of their costs in appropriate
manner so that they should not increase expenses more for the company. This is an essential part
for an organisation to make use of resources in more reliable manner so that extra costs can be
controlled. This can help all operational departments to make considerable and well effective
reputation with an organisation (Figge and Hahn, 2013).
By this, manager can easily be able to examine total information about company’s overall
resources, whether they are utilised in more effective manner during service deliver to various
passengers. In respect to increase more valuable outcomes within a definite set of time the
company can require to control unethical costs and expenditure those are incur during the time.
Cost seems to be value of amount which is delivery for the purpose of getting something. These
are either directly or indirectly related with production process. This seems to observe that
without having proper flow of funds management would not be able to attain their set aims those
are primary motive of Ryanair Airlines. There are various types of costing method those are
applicable within an organisation in order to evaluated net profitability for the cited company.
Some of them are discuss underneath:
Absorption costing: These are said to be an effective costing method which are applied
during production process. It will consist of both variable as well as fixed costs because of this, it
is known as full costing. As these costing methods is more flexible in nature but cannot be taken
as more effective for making valuable decision in near future (Herbert and Seal, 2012). All costs
which is reliable as per certain criteria but cannot be taken into account future planning.
Marginal costing: It refers as those costs which are use during production of additional
units during the time. Another name of this method is period costing as it uses to consider only
variable cost and fixed costs are apportioning during calculation of contribution per unit. These
more reliable costing techniques which are used by mangers for future decision making.
Calculation of net profit by using various costing methods
Marginal costing income statement
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Particulars Amount
Sales revenue = (selling price * no. of goods sold) 9000
Marginal Cost of goods sold: 5520
Production = (units produced * marginal cost per unit) 5460
closing stock = (closing stock units * marginal cost per
unit) 600
Contribution 3480
Fixed cost = (manufacturing+ non-manufacturing) 2400
Net profit 1080
NET INCOME AS PER ABSORPTION COSTING:
Sales (10*900) 9000
less:
Cost of Production 5760
Gross Profit 3240
LESS:
Fixed and variable cost: 2400
variable non-manufacturing overheads 1002500
NET INCOME AS PER ABSORPTION COSTING: 740
M2: Apply use of outcomes calculated by using net profitability
This can see that by taken into consideration by an effective accounting technique, this can
assist in attaining maximum advantage to Ryanair airline. This will be assist in recording entry of
financial transactions that are done by the company. Some tools are standing costing, marginal as
well as absorption costing. In case they using marginal costing they are able to earn a net profit
of 1080. While with the use of absorption costing they are getting profit of 740.
D2: Interprets data for a range of business activities carried by Ryanair
According to be above mentioned tools, net profit for the company can be determine by
taking both marginal and absorption costing. The financial report of Ryanair is indicating
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positive rate of growth as per the cash budget and income statements. They are having sufficient
amount of cash to plan their future and make payment of outstanding debts.
TASK 3
P4: Advantage and disadvantage of using planning tools in budgetary control
Planning is an essential aspect for every business; these will assets an organization to make
control and management over the performance of overall operations during the time. In order to
get more reliable outcomes during the time, Ryanair airlines need to prepare budgets for the
purpose of estimating future growth and financial stability so that chances of getting more
reliable results can be enhanced. Because, budgets are said to be an essential aspect which is use
by company to estimate total costs and expense a company is going to incur during the providing
services to their customers (Caglio and Ditillo, 2012). There are various types’ budgets that are
useful in this process. Some of them are operational, sales, production and raw material or cash
budgets. All these crucial budgeted are being use to be control by using effective planning tools
so that chances of mistake can be hedge. With the use of various types of tools, they can be able
to control effects those are related with overall growth of the company. Some of them are discuss
underneath:
Forecasting tools: This happens to be utmost important tools which will be use by
company to estimate future risk that are associated with the company internal or external
management (Forecasting methods, 2018). With the help of this, Ryanair Company can easily be
able to identify total gains and losses they are going to incur over the period of time.
 Advantage: There are certain crucial benefits of using this tools manager can easily able
to analyse total gains and losses that are affecting overall gains of an organisation. With
this chances of getting more clear vision can be attaining in more quickly.
 It assists in estimating future by using appropriate idea and cost control process. It will
help them to operate their business as per the current trend of the company.
 Disadvantage: The major limitation of using this tool is that future is very hard to
estimate because of which chances of getting more reliable outcome can get impact.
 Leading indicators series consists of various information on inventory cost and
unemployment claims can be difficult to manage.
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Contingency tools: This happens to be an essential planning tool which are helpful for
the account managers to design overall aims in respect to formulate plans under any given
situations. This is effective in case, situation is more difficult for the managers to resolve
(Chenhall and Smith, 2011).
 Advantage: According to this tools opportunity to get more reliable and accurate results
can be more. Because in small businesses, it has been seen that plenty of mistakes are
arises in any point of time which can only be solve by using appropriate tools.
 Budget performance incentives is applicable to make understanding of all sales cost those
are affecting the business of the company.
 Disadvantage: Because of dynamic nature, some time it does not able to provide more
reliable outcomes to the company.
 It often need businesses to have sufficient amount of resources to back up their
contingency plans. In case budget is lacking with any kind of aspects they are not able to
perform well in near future time.
Cash budget
Particulars January February March
balance b/d 15000 33000 -52000
cash receipts:
cash sales 75000 80000 90000
cashed credit sales 200000 208000 233000
cash payments:
paid credit purchases 135000 150000 195000
other operating expenses 122000 123000 123000
4 forklift trucks 100000
total 33000 -52000 -47000
M3: Analysis of planning tools
From the above mentioned various types of planning tools Company should be able to
provide accurate results. In order to enhance overall efficiency of Ryanair airline services, it is
essential to make use of effective planning techniques. In case company uses forecasting tools
they are easily be able to deal with all kind of issues that are affecting the operating budget of the
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company. While Contingency tools are control all kind of risks those are restrict them to reach at
their aims.
D3: Critical evaluation of financial problems
According to the mentioned case study of Ryanair airline which is having various issues
related with passengers and use of management aspects are arise because of finance. In leading
sustainability of the company. Ryanair company uses various planning tools which are more
reliable for resolving various issues those are helpful for attaining more benefit for the company.
Product level issues, cash flow associated issue can be resolve by using these tools.
TASK 4
P5: Comparison of financial problem those are arise in Ryanair with Lufthansa airline
It has been seen that their various financial issues that are associated with Ryanair
company. It can helpful in making proper evaluation of financial performance with past one. In
respect to determine overall financial issues those are being seen in airline companies are
mentioned below. There are various types of problems that are discussed underneath:
Profit level: This can indicate certain things regarding a company ability to succeed its
expenses. Maximum expenditure associated with earning can show that Ryanair is struggling to
maintain costs at low level (Herzig and et. al., 2012).
Production level: According to unavailability of sufficient amount of funds a company
cannot be able to earn maximum level of productivity with total number of resources.
In order to resolve various issues some sort of financial tools and techniques are needed
to be used. Some of them are discuss underneath:
 KPI (Key performance Indicators): This seems to be quantifiable measure which is
used to assess the success of an organisation, employees of Ryanair company. This will
be use to compare actual performance with previous one.
 Benchmarking: It is use to compare one business processes and overall performance
metrics to Ryanair best practices from other companies. This seems to measure the
quality of an organisation products, services and strategies that are going effectively.
Comparison:
Ryanair Airline Easy Jet
They are one of the effective airline services There are various useful techniques such as
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providers. But in this process they are incur
huge expenses that create problem for various
people. They can resolve those issues by using
budgeting techniques.
audit committee report that is being prepared
by the company in respect to analyse the
overall financial position of the company.
They need to use Key performance indicators
to manage and determine their overall
performance during the time.
Benchmarking can used to provide useful
information about the company set standard
those are reliable for detecting financial issues
of the company.
M4: Critical evaluation of financial problems
There are various types of financial issues those are affecting performance of Ryanair
airline. These can be resolve by using cost accounting systems and stock management systems.
Rynair used to make consider various financial techniques such as financial governance and
benchmarking to overcome all issues those are affecting the profitability of the company (Kotas,
2014). In respect to get more success in coming period of time they need to make use of tools in
effective ways.
CONCLUSION
From the above project report, it has been concluded that management accounting can
leads to increase effectiveness as well as control of various impacts those are affecting
performance of Ryanair. This can be resolve by using various accounting systems and reporting.
With the use of costing techniques managers can easily be able to determine net profitability of
an organisation. The can assist in providing more sustainable growth chances to the company.
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REFERENCES
Books and Journals:
Hilton, R. W. and Platt, D.E., 2013. Managerial accounting: creating value in a dynamic
business environment. McGraw-Hill Education.
Ward, K., 2012. Strategic management accounting. Routledge.
Burritt, R. L., Schaltegger, S. and Zvezdov, D., 2011. Carbon management accounting:
explaining practice in leading German companies. Australian Accounting Review. 21(1).
pp.80-98.
Soin, K. and Collier, P., 2013. Risk and risk management in management accounting and
control.
Van der Stede, W. A., 2011. Management accounting research in the wake of the crisis: some
reflections. European Accounting Review. 20(4). pp.605-623.
Banerjee, B., 2012. Financial policy and management accounting. PHI Learning Pvt. Ltd..
Figge, F. and Hahn, T., 2013. Value drivers of corporate eco-efficiency: Management accounting
information for the efficient use of environmental resources. Management Accounting
Research. 24(4). pp.387-400.
Herbert, I. P. and Seal, W. B., 2012. Shared services as a new organisational form: Some
implications for management accounting. The British Accounting Review. 44(2). pp.83-
97.
Caglio, A. and Ditillo, A., 2012. Opening the black box of management accounting information
exchanges in buyer–supplier relationships. Management Accounting Research. 23(2).
pp.61-78.
Chenhall, R. H. and Smith, D., 2011. A review of Australian management accounting research:
1980–2009. Accounting & Finance. 51(1). pp.173-206.
Herzig, C. and et. al., 2012. Environmental management accounting: case studies of South-East
Asian companies. Routledge.
Kotas, R., 2014. Management accounting for hotels and restaurants. Routledge.
Online
Forecasting methods. 2018.[Online]. Available through:
<http://www.oecd.org/eco/outlook/forecastingmethodsandanalyticaltools.htm>.
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