Analyzing Financial Issues and Quality Problems at Ryanair

This assignment delves into the financial struggles of Ryanair, focusing on issues such as high costs, poor product/service quality, and timely delivery. It examines the tools employed by the company to address these problems, including key performance indicators (KPIs) and benchmarking. The assignment also explores the impact of these issues on the company's overall profitability and market sustainability.

Management Accounting

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK 1...........................................................................................................................................1
P1 ................................................................................................................................................1
P2.................................................................................................................................................2
M1...............................................................................................................................................4
D1................................................................................................................................................5
TASK 2............................................................................................................................................5
P3.................................................................................................................................................5
M2...............................................................................................................................................6
D2 ...............................................................................................................................................6
TASK 3............................................................................................................................................7
P4.................................................................................................................................................7
M3...............................................................................................................................................8
D3................................................................................................................................................9
TASK 4............................................................................................................................................9
P5.................................................................................................................................................9
M4:............................................................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES.............................................................................................................................12

INTRODUCTION
Management accounting is the best effective tool that can be used by the organisation in
order to make the business sustainable and also able to gain the business objectives in a pre-set
manner. However, there is a needs to implement the various management accounting tools that
can be used by the organisation in order to gain the competitive advantages over the rivals
(Brandau and et. al., 2013). There is a need to make certain business strategies that can be
converted into gaining the sustainable development. In this report, various management
accounting systems are used and on the basis of these systems, various management accounting
reporting frameworks are used. Net profits is calculated by using various absorption and
marginal costing are used. Various planning tools are used under this reports which would be
helps out for making budgetary controls. Various financial distress which emerged are overcome
by using various accounting tools in an effective manner.
TASK 1
P1
Management accounting is process of identifying, analysing and assessing and evaluating
the financial and non- financial information that can be converted into diverse types of
information (Fleischman, Walker and Johnson, 2010). Management accounting systems are the
most effective systems that can be used by the management of the organisation in order to gain
the sustainable development in an effective manner. There are diverse tools under management
accounting systems are elaborated herewith:
Job Costing system: Job costing systems are the most effective tools that can be used by
the manufacturing units in order to assess the price of a particular job. This is used specifically
in pharmaceutical agencies (Gates, Nicolas and Walker, 2012). This covers gathering of the costs
of various materials, labour and overheads for a particular job. This kind of approach is an
effective tool for tracing costs of the individual jobs and assessing them to oversee if the costs
can be controlled in the future jobs.
Cost accounting systems: This is the most upgraded system which helps in eliminating
the wastage of costs from the cost of production of the product. However, this is truly said that
the management accounting process earlier used this traditional costing tools which were not as
efficient as compared to this tool. However, this simply means that the management needs to
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adopt diverse kinds of tools that can be used for lowering down the cost of production in an
effective manner. This is rightly said that the management needs to adopt these kinds of tools
that are used for attaining the competitive advantages in an effective manner.
Inventory management system: This is the system that can be used by the management
accountant in manufacturing units. However, this is simply said that the management can
optimise the inventory which could be effectively used in making the organisation for gaining
the sustainable development (Harris and Durden, 2012). By way of this system, management can
implement their resources and optimise their available resources in an effective manner. Value of
the organisation's shares often moves importantly along with information about earnings. EOQ
renders information relating to time period for ordering the stock again. This assist in
optimisation of their rendered resources.
Price optimisation systems: This is the system that can be used by the organisation for
examining views of clients related to the prices that are fixed by management of Ryanair for
their diverse services. This will likely assists in determining which prices are being elaborated
for the profits of the organisation.
Importance of the management accounting systems:
The most crucial advantages related to reduction of diverse kinds of expenses like-
aircraft equipment cost, Clients services costs, airport access and maintenance costs. There are
other diverse advantages which are derived by the Ryanair that are elaborated hereunder:
Reduction or control of diverse costs: Use of diverse accounting systems assists in
limiting of diverse expenses of various aspects. These diverse kinds hereunder:
Aircraft equipment costs: Management of the firm considers strategy related to the
control the cost that are covered on tools to purchase single kinds of aircraft ( Ihantola and Kihn,
2011). In this report, during march 1998, Ryanair introduce new Boing 737-800 which is the
next generation aircraft. These kinds of aircraft has the basic types of characteristics that assists
in limiting of diverse costs.
P2
Management Accounting reports are those which records diverse kinds of information
which are related to the regular transactions of the organisation and other details which are
related that could assist management to form an efficient future decisions. This is the
responsibility of the managers for handling these accounting reports for knowing the actual
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financial situation of the business that can be used suitable policies and programs. There are
diverse tools that can be implemented for the reporting of diverse accounts. These reports
required to be made by the Ryanair organisation through which they could covers budget,
accounts receivables, job cost reports, inventory management etc. These are those that can be
used in the organisation in order to gain the sustainability (Mat, Smith and Djajadikerta, 2010).
Henceforth, this introduces the beneficial outcomes to the organisation via rendering them
financial and non-financial information that are totally related to the organisation. This would
assist managers to handle performance and likewise elaborates the variations if any, which limits
the organisation in gaining competitive advantages over the others. This is needed to form these
kinds of reports on annually, semi-annually, quarterly or monthly basis. There are diverse kinds
of management accounting reports which are required to be formed by the accountant of the
cited company which are discussed here as under:
Budget Reports: This covers the budget formation of the organisation even after
assessing the future revenues and expenses which are incurred in the last years henceforth
organisation faces no shortage of funds at the time of performing business operations. While
forming budget, there is a strict needs to know about the employees are executing their business
operations in order to implement the available resources effectively. This limits the employees
who are committed in the business operations in order to implement the available resources
effectively (Otley, 2016). This is made on the basis of the past financial data. Data can be
interpreted in an effective manner. Apart form that, budget reports helps the organisation in order
to gain the sustainability.
Accounts receivable reports: Account manager is accountable to form these report for
handling records of the debtors henceforth, they could determine the payment they will get in the
future period. This secure organisation from the conditions of financial crisis henceforth, it is
crucial to form this reports by the management accountant of the Ryanair. This report identifies
time period through which cash can be collected from their debtors. This will likely assist in
communicating to organisation about issues which may happen in collection process. Accounts
receivable reports reflects list of consumers that are failing to form repayments to organisation
henceforth, this directs the organisation in fromulating strict policies and strategies for them to
recover the debts (B Douglas Clinton CMA and CFM, 2012).
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Job costs report: this report is made for knowing the expenses which will occur in
performing a particular project in the near future. Henceforth, this is likely adopted as a crucial
report which has been made by the accounting managers of the cited company which would
assist in matching expenses along with the forecasted income. The manager is required to
determine the areas where they could attain more profits so that they can allocate funds while
performing of the particular project ( Amidu, Effah and Abor, 2011).
Inventory management report: This report assist the organisation for retaining loyal clients via
rendering them services without any kind of interruptions. This report reflects that the
sufficiency of the spare parts in assisting at the time when damage fall out in the air planes. This
would assist clients to implement their services without attracting any kinds of difficulties.
Henceforth, this is crucial for manager to form the access of total availability of the equipments
along with the organisation
Performance report: This report helps the organisation and outsiders to know about the
company's performance in an effective manner. On the basis of this report, various stakeholders
would be able to make certain performance related decisions in an effective manner (Schäffer,
2013). This reports normally covers the past years financial data and then create a report in an
effective manner. However, this would assists in making an effective strategy in an effective
manner.
M1
Ryanair airlines have so many benefits that can be achieved by using various tools as this
would help out to make certain tools which would help out in rendering information that can be
helpful in rendering an adequate information that can be helpful in forming an efficient decisions
and forming an efficient strategies which introduce the positive outcome to them (Albu and
Albu, 2012). The main advantages attained by the cited organisation in order to make effective
outcome to them. Some of the advantages are mentioned hereunder:
Reduce costs: With the help of this, accounting manager of the Ryanair airlines is accountable to
form accounts via which they could assess the forecasted expenses while rendering services.
Enhancement of the financial return: by taking assistance of the job costing and inventory
management tools, manager could concentrate on the crucial matters that could introduce an
efficient results to the organisation.
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D1
They both renders an optimum contribution to the organisation for growing success of the cited
organisation in this cut throat market. By considering these tools and reporting systems which
assist in rendering effective directions to the organisation henceforth, they could fulfilled
assigned task for enhancing satisfaction level of their targeted consumers.
TASK 2
P3
Costs refer to that an amount of value which is necessary to be obtained in the business
operations without any disruptions so that the company can achieve their desired targets and
objectives on the time. It can be obtained in the manufacturing process, payment made to the
labour, factory expenses etc. Hence, the cost accountant of the company is responsible to
estimate the costs and accordingly allocate them to their different divisions or departments.
Ryanair company is already settled the goodwill and brand across the world, capture the larger
market share, and also achieved the larger number of loyal customers (Sisaye and Birnberg,
2010). Therefore, it is more important for them to hold their goodwill and brand image by
providing an efficient vehicle along with distinct features which makes them different from their
competitors. Firstly, the manager needs to be separate the customers on the basis of their buying
power and accordingly produce and manufacture the products so as to increases their level of
satisfaction. The cost factor is an important factor which influences the buying pattern of the
customers. There are appropriate techniques and measure which assist the company in
minimizing the extraordinary cost obtained in the process of manufacturing which directly
impacts their profits in an affirmative manner.
Marginal costing: Under this, opportunity costs is determined which occurred at the time
of generating the extra unit of their product (Stergiou, Ashraf and Uddin, 2013). The cost change
as per the change in the production units. Here, no fixed cost is considered while calculating the
marginal costing. However, this can be simply said that to calculate the marginal cost, no fixed
cost is to be considered.
Absorption costing: This is the costing method which is the most effective tool that
covers all the costs which are related to the cost of production. On the other hand, this can be
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simply said that the all the manufacturing costs are to be covered under this, irrespective of the
fixed and variable costs.
Particulars Per unit cost Amount in (000)
Sales (10*900) 10 9000
Less: Marginal cost of goods sold: 5400
Cost of Production (6*910) 6 5460
closing stock (6*10) 6 60
Contribution 4 3600
fixed overheads: 400
fixed non manufacturing overheads (600*1) 1 100
fixed manufacturing overheads 300
NET INCOME AS PER MARGINAL COST 3200
Particulars Per unit cost Amount in(000)
10
Sales (10*900) 9000
Less: Cost of goods sold:
Cost of Production (910*6.32) 6.33(6+0.33) 5760
Gross Profit 3.67 3240
Less: Selling and Administrative cost:
Non Manufacturing fixed overheads 100
NET INCOME AS PER ABSORPTION COSTING: 3140
M2
This can be simply said that by taking an appropriate costing method help out to gain the
benefits to Ryanair Airlines. This would assist in considering routine transactions into the
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financial statements. This would likewise to predict the situations that can cope up with the
situations.
D2
According to the above mentioned situations, this can be rightly observed that the profits is
generated via implementing marginal costing which have been assessed in an effective manner.
Here, the net profits as per the marginal costing is calculated 3200 which is more than the profits
calculated by using absorption costing method. The net profits calculated as per absorption
costing is 3140.
TASK 3
P4
Budget is the tools through which the forecasting of the expenses and revenues can be
done for a particular period of time. Budget is the main tool that can be used by the organisation
in order to assess the overall situations in an effective manner. However, various strategies are
made under this. Here are some of the advantages and disadvantages have been mentioned
hereunder:
Following are the objectives of budgetary control
 It assists in ascertaining the desired goals and objectives of the company which is
necessary to be attained in future.
 It's main objective to communicate the plans to different divisions or departments in
order to attain the desired goals and objectives at a time
 Cost allocation to cost centre in order to make the quality product without any disruption.
 According to the employee's capabilities, allocate their roles and responsibilities (Viere,
von Enden and Schaltegger, 2011).
There are different types of planning tools in budgetary control which are as follows:
1. Incremental budgeting: It is the budget which is prepared on the basis of past budget so
that the managers can able to find out the necessary amount used in the new budget. The
resources are finally allocated after deeply analyzing the previous budget which assists in
gathering the reasonable outcomes in a future period. It encourages managers to spend
more amount in the project execution activities which my impacts the budget prepared for
the future period.
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Advantages:
 It is very easy for employees to make understand and operate.
 Appropriate coordination in between the divisions or departments of the company assists
in maintaining the relationship which makes affirmative results to the company.
 Chances of arising conflicts will be minimized because each and every department get
equal support and guidance.
Disadvantages:
 When the employees give new ideas to the managers, in return managers does not
provide any incentives to them which in result demotivate them (Williams and Seaman,
2010).
 By spending a large amount on the current budget which brings trouble for the company
to make the future budget.
 The priority for resources may change due to the budget which has been made manually.
Forecasting tools: These tools assist in forecasting of the activities on relying of their past data.
There are diverse kinds of forecasting tools are used under this which contains time series, cross-
sectional, longitudinal data and so on (Abdel-Kader, 2011).
Advantages: This assist in identifying the objectives. By using this, various functions are
implemented by the managers in terms of forecasting of the costs that can be attained in the near
future.
Disadvantages: Forecasting are totally based on the assumptions which are not always correct.
Which is the main drawback of the organisation.
Cash budget
Particulars January February March
balance b/d 15000 33000 -52000
cash receipts:
cash sales 75000 80000 90000
credit sales from last month (80%) 200000 208000 208000
credit sales from two months ago(10%) 25000 25000 26000
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credit sales from three month ago (8%) 20000 20000 20000
cash payments:
credit purchases from last month (75%) 135000 150000 150000
credit purchases from two months ago (25%) 45000 45000 50000
other operating expenses 122000 123000 123000
4 forklift trucks 100000
total 33000 -52000 -31000
M3
There are various planning tools that can be required to be considered by the organisation
for attaining the growth for a specified time period. These kinds of tools covers forecasting,
scenario and contingency planning tools which assist the managers for making the budgets that
can directly assist the employees to execute in an appropriate manner.
D3
By considering the various accounting tools, company can redress its financial problems
in an effective manner. KPI, benchmarking and so many tools are used for overcome the finance
related problems.
TASK 4
P5
Ryanair as well as Easy Jet are 2 main organisations that render services in airline
Industry. There are various problems that are faced by both companies while rendering their
functions. are two same sector organisation which provides their services in airline industry
(Zainun Tuanmat and Smith, 2011). Such issues are emerged in company due to not opting
effective system of accounting in relation of transactions of records. There are several techniques
and methods that can be opted for resolving the financial issues such as benchmarking, key
performance indicator etc. that can aid in effective financial problems response:
Financial Issues in Ryanair
Here are discussed major issues faced by Ryanair mentioned below:
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 Profit level: After the consumer volume increment in 1990, company faced various loss
impacting the entire profitability of the company.
 Product & service quality: In regard of achieving sustainability in market, company
need to provide unique quality apart from their competitors. So, it can be said that aircraft
quality is also a huge problem.
 Lack of Timely Delivery: Late delivery of services and lack of consumer satisfaction is
leading to a major loss in financial recognition of enterprise.
Tools to react financial Issues
There are numerous tools that are opted by Ryanair which are mentioned as below:
 Key performance indicators: This is considered as an effective tool that will assist in
performance evaluation of the company. Company opt two KPI methods i.e. non-
financial and financial. This assist in removal of existing performance gaps (Zaleha
Abdul Rasid, Rahim Abdul Rahman and Khairuzzaman Wan Ismail, 2011).
 Benchmarking: The framework is opted through administration to determine some
standards that are needed to adhere through performance of worker and their functions. It
helps in accomplishing requirements of tasks.
Ryanair Easy Jet
The company face problems in context of
enquired expenses. For this aim, they
determine to adopt KPI technique that can help
them in achieving their expenses.
Easy Jet is delivering their operations and
function in many nations. To control their
activities effectively, they adopt various
financial governance tools to respond the issues
of finance.
SMART administration determination for each
division. This can aid in effective operations
and regulations.
The company adopt benchmarking as tools to
render standards along with effective operations
of their functions on such provisional grounds.
M4:
Various financial problems associated with the inventory administration and cost
accounting etc. that is required by adopting several methods like benchmarking and KPI etc.
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Otherwise, these problems create negative influence on profitability and productivity of
organisation.
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CONCLUSION
From the above report, it has been summarized that management accounting systems has
played a very eminent role in maximizing the performance of Ryanair airlines in a minimum
time period. In this report, profits have been evaluated by using marginal and absorption costing
tools. Various budgetary-control tools are assessed here. Thus, it has been analyses that above
project is showing the major problems faced by accounting system at workplace as well as
various expenses which is incurred while running a business entity.
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REFERENCES
Books and Journals:
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