Management Accounting (ACC202) Report: Flying Airline Analysis

This management accounting report (ACC202) analyzes the financial viability of Flying Airline Company, evaluating three key situations. The first situation assesses the cost implications of replacing an old loader truck with a new one, using differential cost analysis to determine the financial benefits. The second situation compares the profitability of non-stop and one-stop flight routes, considering revenue, costs, and differential costs. The report highlights the importance of economic and operational factors in decision-making. The third situation examines the financial viability of a special tourist charter flight proposal, calculating profitability under both normal circumstances and when spare capacity is available. The report uses calculations to determine the best course of action for the airline, emphasizing cost reduction and profit maximization strategies. The report provides comprehensive financial analysis to aid in management decisions, using relevant calculations and citing academic sources.

Running head: MANAGEMENT ACCOUNTING (ACC 202)
Management Accounting (ACC 202)
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
Situation 1 (Identifying the financial viability of replacing old loader truck with new loader
truck):.........................................................................................................................................2
Detecting the financial viability of old and new loader truck with relevant calculations
conducted for Flying Airline Company:....................................................................................2
Situation 2 (Calculating financial viability of flight route for Flying Airline Company):.........4
A) Detecting non-stop route and one-stop route financial viability by conducting adequate
calculation:.................................................................................................................................4
B) Evaluating other factors, which needs to be evaluated before conducting any decision for
Flying Airline Company:...........................................................................................................7
Situation 3 (Stating viability of the new special tourist charter flight proposal presented to
Flying Airline Company):..........................................................................................................8
A) Stating the calculations needed by Flying Airline Compony to accept the special tourist
charter proposal when adequate spare capacity is present:........................................................8
B) Mentioning the viability of the new proposal with adequate calculation when there is no
space available to Flying Airline Company:............................................................................10
Reference and Bibliography:....................................................................................................12

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Situation 1 (Identifying the financial viability of replacing old loader truck with new
loader truck):
Detecting the financial viability of old and new loader truck with relevant calculations
conducted for Flying Airline Company:
Situation 1 (Not replacing Old loader)
Particulars Amount
Depreciation for old loader $ 25,000.00
Write off for old loader $ 0.00
Proceeds from sale of old loader $ 0.00
Depreciation for new loader $ 0.00
Operating costs involved for old loader $ 80,000.00
Total Operating cost $ 105,000.00
The calculation that is conducted in the above table mainly helps in identifying the
overall operating cost incurred by Flying Airline Compony, when old loader truck is used in
its operations. The total operating cost mainly amounts to $105,000, which includes
depreciation and operating cost involved for the old loader. This relevant calculation of cost
incurred from equipment allows the management to take adequate decision for cutting its cost
and increase their profitability. Cannon (2014) mentioned that with the evaluation of cost
analysis management can detect actual cost incurred by its operations, which helps in making
adequate management decision.
Situation 1 (Replacing Old loader)
Particulars Amount
Depreciation for old loader $ 0.00

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Write off for old loader $ 25,000.00
Proceeds from sale of old loader $ (5,000.00)
Depreciation for new loader $ 20,000.00
Operating costs involved for old loader $ 50,000.00
Total Operating cost $ 90,000.00
The table mainly represent the overall cost if the old loader is replaced with the new
loader truck. Relevant reduction in operating cost is detected from operations, which could
eventually help the management of Flying Airline Company to take adequate cost decision.
The decline operation cost mainly declined from the value of $105,000 to $90,000, which is
relevantly a profit of $15,000 identified from the implementation of new loader truck. The
company with the help of cost analysis can detect financial enhancement, which is attained
from the implementation of the new loader. On the other hand, Collier (2015) argued that
viability of cost analysis mainly reduces when adequate research is not conducted by the
management on cost. The relevant reduction of cost is detected from the sale proceeds of the
old loader, which cannot continue in next year. Hence, from second year the overall operation
cost will be at the level of $95,000, which is relatively lower from the current expenses
incurred by the company.
Situation 1 (Differential cost)
Particulars Amount
Depreciation for old loader $ 0.00
Write off for old loader $ 0.00
Proceeds from sale of old loader $ 5,000.00

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Depreciation for new loader $ (20,000.00)
Operating costs involved for old loader $ 30,000.00
Total Operating cost $ 15,000.00
The differential calculation conducted in the above table mainly helps in
understanding the overall cost savings, which could be conducted by Flying Airline Company
after implementing the new loader truck in its operations. The overall differential cost
analysis mainly indicates total difference in operating cost by $15,000, which is obtained by
the company if new loader is implemented. The difference in actual operation cost between
old and new loader can be detected from the above calculation, which amounts to $30,000.
Hence, the implementation of new loader truck could eventually allow the company to attain
higher profits, due to reduction in its operating cost. In this context, D'Onza, Greco and
Allegrini (2016) mentioned that management with the evaluation of differential cost can
detect financial improvement, which could improve their cash inflow and reduce cash
outflow. Therefore, Flying Airline Company could adequately use the new loader truck, as it
helps in reducing operating cost, which in turn improves its profit generation capacity.
Situation 2 (Calculating financial viability of flight route for Flying Airline Company):
A) Detecting non-stop route and one-stop route financial viability by conducting
adequate calculation:
Situation 2 (Non-Stop Route)
Particulars Amount
Revenue from passenger $ 240,000.00
Revenue from Cargo $ 80,000.00
San Francisco (landing fees) $ 0.00

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Cost (Flight crew) $ (2,000.00)
Cost (Fuel) $ (21,000.00)
Cost (Meal) $ (4,000.00)
Cost (Aircraft maintenance) $ (1,000.00)
Net revenue from operations $ 292,000.00
The calculation conducted in the above table mainly represents the revenue that will
be generated from nonstop route, which is currently conducted by Flying Airline Company.
In addition, the company is mainly able to generate profit of $292,0000 from its operation in
nonstop route. The operations conducted by the company Flying Airline Company is mainly
helps in generating higher profits. The total revenue of $320,000 is mainly identified from the
non-stop route, which could help in improving its profitability. On the other hand, the total
cost of $28,000 is conducted by Flying Airline Company in non-stop route. Evaluation of
overall cost and revenue incurred from operations could eventually help in detecting financial
viability of the operations (Evans and Popova 2016).
Situation 2 (With stop route)
Particulars Amount
Revenue from passenger $ 251,000.00
Revenue from Cargo $ 80,000.00
San Francisco (landing fees) $ (5,000.00)
Cost (Flight crew) $ (3,400.00)
Cost (Fuel) $ (26,000.00)
Cost (Meal) $ (4,900.00)

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Cost (Aircraft maintenance) $ (1,000.00)
Net revenue from operations $ 290,700.00
The financial viability of with stop route can be identified from above calculations
conducted in above table. The relevant profit of the company will mainly amount to
$290,700, when implementing the with stop route mentioned in situation 2. The evaluation
also indicates the increment in passenger revenue, which is achieved by the company when
one route stop is adopted. However, the increment in revenue was mainly supported by rising
expenses incurred from the new operations. This could eventually lead to rising total cost
from operations, which reducing actual profit incurred from the process. The extra cost
incurred from lading fees of San Francisco is relatively reducing the profits that is obtained
from the new one route operation. Fleischman and Parker (2017) stated that evaluation of
financial cost could eventually help the management in identifying the excess expenses
conducted on operations, which could help in improving their profitability.
Situation 2 (Differential cost)
Particulars Amount
Revenue from passenger $ (11,000.00)
Revenue from Cargo $ 0.00
San Francisco (landing fees) $ 5,000.00
Cost (Flight crew) $ 1,400.00
Cost (Fuel) $ 5,000.00
Cost (Meal) $ 900.00
Cost (Aircraft maintenance) $ 0.00
Net revenue from operations $ 1,300.00

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The calculation conducted on differential cost analysis is understood from the
operations, which might help in detecting financial viability of one stop route. From the
evaluation relevant loss can be identified by Flying Airline Company if one stop route is
adopted. This could eventually decline the actual profits obtained by $1,300, as expenses
from operations has increased relatively. Therefore, total revenue from implementing the one
stop route is could generate profit of $290,700, while the nonstop route could obtain
$292,000. Hence, the Flying Airline Company needs to reject the one stop route, as it will
reduce the actual revenue generated from operations. Gillion et al. (2016) mentioned that the
use of operational cost analysis could eventually help the companies in detecting financial
viability of each projects.
B) Evaluating other factors, which needs to be evaluated before conducting any decision
for Flying Airline Company:
The evaluation of overall condition presented in Situation II could help in detecting
other factors before reaching any decision. The economic factor needs to be evaluated by
Flying airline company, which could help in understating the purchasing power of
consumers. This detection of purchasing power could eventually help in understanding ability
of the consumer to pay relevant price for the services provided by Flying Airline Company.
In addition, operational increment of the company after implementing one stop route could be
identified, which might help in expanding its operations (Grant 2016). This expansion of the
operations could eventually help in generating higher revenue in long term. Both economic
and operational factor needs to be evaluated by Flying Airline Company before taking any
kind of decision based on financial perspective.

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Situation 3 (Stating viability of the new special tourist charter flight proposal presented
to Flying Airline Company):
A) Stating the calculations needed by Flying Airline Compony to accept the special
tourist charter proposal when adequate spare capacity is present:
Situation 3
Particulars Amount
Revenue from passenger $ 250,000.00
Revenue from Cargo $ 30,000.00
Total revenue from operations $ 280,000.00
Variable expenses $ 90,000.00
Fixed cost $ 80,000.00
Total expenses from operations $ 170,000.00
Profit from operations $ 110,000.00
Profit under normal circumstance generated from the overall operation could be
identified from the above calculation. The overall revenue of $280,000 is mainly identified
from the operations, which comprises revenue from both passengers and cargo. On the other
hand, the total expenses comprise with variable and fixed cost incurred from the operations,
which amount of $170,000. Thus, both total expense and revenue mainly allows the
organisation to generate the overall profit of $110,000 under normal circumstances. Isard et
al. (2017) mentioned that with the evaluation of overall cost and revenue management can
detect project viability and make adequate investment decision.
Situation 3
Particulars Amount

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Revenue from passenger $ 160,000.00
Revenue from Cargo $ 0.0
Total revenue from operations $ 160,000.00
Variable expenses $ 85,000.00
Fixed cost $ 0.0
Total expenses from operations $ 85,000.00
Profit from operations $ 75,000.00
The valuation of the overall table helps in identifying the profits that will be generated
from the proposed New Special Tourist Charter Flight. In addition, the total revenue is
mainly generated from passengers, while no revenue is accumulated from cargo operations.
On the other hand, the revenue generated from passengers is relatively low, as compared to
revenue generated under normal circumstances. Furthermore, the overall expenses incurred
from the New Special Tourist Charter Flight is variable expense on the assumption that space
is available to Flying Airline Company to accommodate the charter plane. The
accommodation of the charter plane is mainly declining the overall fixed cost incurred by the
company. This relevant omission of the fixed cost is mainly reducing the overall total
expenses incurred from operations. Moreover, profits from operations is detected to be at the
levels of $75,000. The profit level is relatively lower than the profit generated under normal
circumstances. Joda and Bragger (2015) mentioned that companies by evaluating different
cost factors can detect viability of the proposal presented by customers. However, Lanen
(2016) argued that management needs to evaluate all the cost factors or else the project would
increase expenses and hamper financial stability of the organisation.

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From the overall evaluation, Flying Airline Company could eventually help in
generating higher revenue from its operations, as fixed income will be provided from the
touristy company. Hence, accepting the proposal of New Special Tourist Charter Flight could
eventually help Flying Airline Company to improves its profitability in long run. However,
under normal circumstance the company would attain higher profit, but constant orders
would not be provided. Therefore, accepting the proposal for New Special Tourist Charter
Flight could help in improving its financial viability. Li (2015) cited that cost analysis allow
the company to evaluate performance of its operations in different circumstance and detect
the minimum revenue requirement for achieving breakeven. The detection of breakeven value
and units allow the management to take operational decision for improving its current
financial capability.
B) Mentioning the viability of the new proposal with adequate calculation when there is
no space available to Flying Airline Company:
Situation 3
Particulars Amount
Revenue from passenger $ 160,000.00
Total revenue from operations $ 160,000.00
Variable expenses $ 85,000.00
Fixed cost $ 80,000.00
Total expenses from operations $ 165,000.00
Loss from operations $ (5,000.00)
Relevant loss is calculated from the above table, if no spare space is available to
Flying Airline Company. The loss of $5,000 can be detected if Flying Airline Company

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accept the offer for New Special Tourist Charter Flight. The company will incur an extra
fixed cost of $80,000 for accommodating the new charter plane for supporting its activities.
This could eventually increase loss from operations, which will incur by Flying Airline
Company due to the increased total expenses (Marglin 2014). Hence, if no extra space is
available then the company needs to reject the proposal for New Special Tourist Charter
Flight, as it might hamper its future financial stability.