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The Balanced Scorecard EasyJet

Extracts from this document...

Introduction

THE BALANCED SCORECARD - EASYJET ACC 3500: Advanced Management Accounting Academic Year 2007-2008 Semester Two (2) Date of Submission : Friday 7th March 2008 Name and Student Number : Wahedur Choudhury, M00005052 E-Mail : [email protected] Module Leader, Seminar Tutor : John Fletcher Seminar Class : Tuesday 12:00 - 2:00 Words Count : CONTENTS Introduction 3 General theory and reasons for development in costing Analysis 7 Benchmarking for Easyjet New costing methods and their relevance to Easyjet Balanced Scorecard related to Easyjet Conclusion 14 Reference 15 Bibliography 16 Appendices 17 Data/information from Easyjet website that may be useful to this coursework INTRODUCTION Accounting is "the process of identifying, measuring and communicating economic information to permit informed judgement and decisions by users of the information" a Management accounting provides financial and non financial information about a company, which is used by a manager to make certain decision such as costing/cost planning, improving the business, achieving the required output, improve efficiency and effectiveness, increasing profits. Traditional management accounting used in the early days was acceptable as the types of business and accounting were not complex. Traditional management accounting used cost controlling techniques, measuring cost and allocating overheads to cost centres. Variance analysis was used to compare different budgeted cost with actual cost also cost volume profit was used, and the break even analysis to find the point at which profit is maximised. If you compare today with the 1980's, the economy has seen many complicated changes. Firms are facing tough competition by trading in a highly competitive environment. Improvements to technology and other factors help businesses to face the competition by being efficient. As a result accounting also became complicated. The problem with traditional management accounting was that the work produced and the business environment inconsistent with the accounting technique. There are changes in the cost structure; there are different types of cost which have different treatment. ...read more.

Middle

Any problems that can be identified can be worked on and improve on that area. The way Easyjet can stand out from their competitors and become a market leader they need to use benchmarking and implement best practice. New costing method and its relevance to Easyjet The way Easyjet keeps cost low is different from the techniques I have mentioned above. The way Easyjet keeps its cost low depends on the following 1) Flights were first sold over the phone, without travel agency. To reduce call centre cost and staff cost they started selling flights on the internet. It also reduces printing and postage cost of tickets. Passengers can book a holiday to sit them and pay online. 2) On each aircraft the cost per seat reduces if the plane if utilized to the maximum. 3) Instead of sending tickets to the customers, which cost for printing and postage and distribution cost. Passengers receive an email confirming their flight which they print and bring on the day. 4) Passengers do not get free lunch on board instead they pay for the food. This reduces the cost. 5) Easyjet use main airports and making efficient use of them and at the same time having quick turnaround time. 6) In their office all work is done on the computer and minimizes the usage of paper having a paperless office. Balanced Scorecard related to Easyjet Customer perspective Here the objective of Easyjet is to improve the sales every year, selling to existing and new customers. To do this they must gain customer satisfaction and loyalty, rest will speak for it self. 1) One of their focuses is to provide passengers with low cost travel with care and convenience. A measure to keep flights cheap is that Easyjet should control and reduce costs as they are doing currently enabling them to sell at low fares. Keeping the cost low means they can afford to give offers to their customers such as discounts or free tickets. ...read more.

Conclusion

It may useful to know revenue/cost per passenger, the mix of freights such as economy class, first class and business class and the different fares charged also cost of flight attendants per flight and revenue earned from ancillary services. 3) Their aim is to have maximised profitability so it may useful to calculate certain ratios such as Return on Capital employed, Return on Equity, Net Profit Margin, earnings per share. This need to be increasing may also increase shareholders returns/wealth. Higher the profitability ratio means Easyjet a high financial performance. 4) They need standardised/upgraded planes, which is comfortable for the customers. They can decide whether to lease them or purchase them (purchase of fleets lowers the lease cost) and the average age of fleet (how long are they kept). If they update their fleets after certain periods cost may reduce and it better for the environment also gives better turnaround times. CONCLUSION The balanced scorecard is a way of achieving a firm's mission/ objective. Objectives are identified and translated into performance measures, which are put into action. Targets and measures will be set out on how to achieve the objectives within a period of time. If it is successful the objectives will be achieved. It is also a way of improving the business and building on the weak areas not only for the short term but also for the long term. It looks at only four perspective namely customer, internal business, learning and growth and financial. I think this is just the start it is a way of helping business improving their business competitiveness and a way to achieve their strategic objective. The benefit to the organisation is that it helps them to improve communication and evaluate their progress. Whatever accounting techniques there is, it is useful for business what is needed is just are improvements to the techniques and possible new techniques. But there is room for improvement for example it should a perspective relating to the environment. Measures can be identified as to what Easyjet can do to be more environmental friendly although this may be identified in the business perspective. ...read more.

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