Management Accounting Report: Profitability of Louise Fairbern

This report provides a detailed profitability analysis of Louise Fairbern's businesses, encompassing both architecture firms and commercial window treatment businesses. It evaluates the profitability of each business unit and its individual clients, utilizing financial data such as gross revenue, discounts, direct costs, and overhead costs to determine net profitability. The analysis highlights that the commercial window treatment business is more profitable, with specific clients like Chatham demonstrating higher profit margins. The report also identifies the need for strategic planning, benchmarking, and cost accounting systems to improve profitability across all business segments. It concludes by emphasizing the importance of management accounting in decision-making and provides recommendations for enhancing financial performance through client surveys, strategic planning, and improved cost management.

MANAGEMENT
ACCOUNTING

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
provide analysis of profitability of customers, total profitability and distribution channel
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-firm window-treatment business
Over
all
profi
tabili
ty
Adams Betz Total
Chatha
m
Dedha
m Elm Total
GROSS
REVENUE 234000 188800 422800 357380 147840
732
00 578420
1001
220
3404
00
1

Less: discount 23400 23400
366
0 3660
2706
0
8510
0
net revenue 210600 188800 399400 357380 147840
695
40 574760
9741
60
1361
60
less: direct cost 147000 117200 264200 218400 115720
570
40 391160
6553
60
2212
60
GP 63600 71600 135200 138980 32120
125
00 183600
3188
00
0
1191
40
less overhead
cost 46805 38295 85100 84127 34802
172
31 136160
2212
60
2212
60
General
expenses 50311 68829
1191
40
1191
40
Net
profitability 34789 67331
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. The individually client of second business are Chatham, Dedham, Elm whose
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,
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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-
 Preparation of strategic plan for the goals of one, three and five years.
 Identify the success of factors like sales, expense, prosperity, growth, productivity
Implementation of the budget (Ax and Greve, 2017).
 Try to seek input from external environment.
 Try to set benchmark of revenues and overhead percentages to leaders of industry (What
is Budgeting?, 2018).
 Development of cost accounting system to identify the exact cost of delivered service of
products.
 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.
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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. and Widener, S.K., 2014. Lean manufacturing and firm
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
What is Budgeting?. 2018. [Online]. Available through: <
https://www.mymoneycoach.ca/budgeting/what-is-a-budget-planning-forecasting>.
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