University Of Central Punjab

Job order costingUniversity Of Central Punjab

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University Of Central Punjab Managerial AccountingAssignment # 1Team project of Job Order CostingSubmitted to: Prof. Ahsin QasimSubmitted By: Afroze Muhammad sufiReg# 14Umara AbdulazizReg# 20Aafreen MasoodReg# 32Ahnif Sajid Reg# 35Job order costing4/11/2014

Table of ContentsRequirement # 13Total cost of flight 1247 of Delta Airlines3Total cost, Revenue, Profit 3Requirement # 24Total cost of flight 53 of JetBlue Airlines4Total cost, Revenue, Profit4Requirement # 3 5 Evaluation of Four Strategies5Requirement # 4 8 Analysis of data8Bibliography10

Keep in mind the constraints regarding this data as the first requirement of deltas current profit calculated on:100% load factor (that may not be possible always)The only one flight of $102 is considered here. And delta has about 15000 flights approx.Keep in mind the constraints regarding this data as the first requirement of deltas current profit calculated on:100% load factor (that may not be possible always)The only one flight of $102 is considered here. And delta has about 15000 flights approx.Requirement # 1 Use the data to determine the following for Delta:Part (a) The total cost of flight 1247, assuming a full plane (100%) Solution:Total costCost of flying full load plane for 1000 miles (1000*0.084*142) =$ 11928Cost of meal (142*10) =$ 1420Total Cost = $13,348

Part (b) The revenue generated by flight 1247, assuming a 100 % load factor and average revenue per one-way ticket of $102Solution:Total Revenue (102*142) = $ 14484

Part (c) The profit per flight 1247Solution:Profit = Total revenue Total Cost 14,484 13,348 = $ 1136

Same is the case here with jetblue airline. Constraints of 100% load factor and flight 53 is not applicable on each time. jetblue also has about 800 planes with 85 destinations in the world. Requirement # 2 Use the data to determine the following for JetBlue.Part (a) The total cost of flight 53, assuming a full plane (100%) load factor.Solution:Total costCost of flying full load plane for 1000 miles(1000*0.053*162) = $8586Cost of snacks (5*162) = $ 810Total Cost = $9396

Part (b) The revenue generated by flight 53, assuming a 100 % load factor.Solution:Total Revenue75*162 = $12150Part (c) The profit per flight 53Solution:Profit = Total revenue Total Cost 12150 9396 = $2754

Requirement # 3 Based on the responses to Requirement 1 and 2, carefully evaluate each of the four alternative strategies discussed in Deltas executive meeting.Solution:Following are the four suggestions 1. Suggestion to do nothingThe Vice President of operation suggested doing nothing We just need to wait until these new airlines run out of money. They cannot be making money with their low fares Comment on this suggestion:

It is better sometimes to do nothing instead of doing something, especially if that something is ill advised or expensive. But in this case there are lots of options than doing nothing.The Vice President is pessimist about the better operation of Delta airlines and the suggestion given by him is an unrealistic.2. Suggestion to low flight faresThe Vice President of marketing, not wanting to lose market share, suggests cutting Deltas fares to match the competition.

The price of your ticket consists of a number of things.Base fareTaxes and airport feesFuel surchargeService fee to issueFoodSeat selectionBaggageBy keeping this in mind its difficult to low faresComment on the suggestion:Cutting fare price with no change in costs will reduce the revenue yielding low profit. This suggestion is also not acceptable in long run.

3. Suggestion for cutting costCFO emphasized the potential for cutting costs.Comment on the suggestion:This is a good suggestion. Cutting cost will help in increasing profit. Delta can decrease/ reduce its costs by adopting follow techniques.A. Fuel Hedging.B. Use only one kind of plane (this will reduce maintenance and as well as training cost)C. The companies continue to replace old and depleted airplanes with new and upgraded ones. Though initially expensive, new and improved aircraft are morefuel efficient than the existing ones and will help in lowering operating and maintenance costsUse smaller underutilized airports (big airports command high fees because there is demand of so many airlines to use it)D. Use single class seating (as this will reduce the number of crew members required per flight and simplifies the design of interior of plane)E. Direct ticket selling through own websites or at the ticket counter (reduce cost by elimination of middle man)

In October,Delta Air Lines Inc. has announced its plan to purchase 40 new jets from European aircraft manufacturer Airbus in a deal worth$5.6 billion.

Jet Renovation:With passengers demanding comfort andquality servicealong with proper security, airlines are focusing on aircraft redesigning with new and attractive products and services within the travel plan.4. "We previously noted that low-fare carriers represent the greatest competitive threat to Delta," Leo Mullin, the airline's chairman and CEO, said during a Nov. 20 press briefing to unveil the plans. "Delta intends, through the actions announced today, to meet the low-fare carriers head on."Suggestion for starting a new airlineAnother possibility is starting a new budget airline within DeltaComment on the suggestion:Starting new budget airline within Delta needs a detailed planning and involves higher risk. There is also the possibility that new airline fails in making profit and Delta suffers complete loss. So, this suggestion being highly risky but can be acceptable. Delta Group Cayman recently announced its continued expansion with the launch of a Fiduciary Services subsidiary,Delta said it will launch a low-cost subsidiary early next year with an all-coach 757 fleet, initial service in Delta's Northeast-Florida markets, one-way fares that top out at $299 and aggressive cost-control that includes a major focus on direct sales.The wholly owned subsidiary initially will serve established Delta Northeast-Florida

Requirement # 4 The analysis in this project is based on several simplifying assumptions. As a team, brain storm factors that your quantitative evaluation does not include, but that may affect a comparison of Deltas operations to budget carriers.Solution:Given below points can help Delta improve its operationsA. Utilize linear routes structures with one aircraft type.B. Improve turnaround time of airplanes.C.Serving meal in 3 hrs flight when all other airlines are offering snacks.D.Fuel hedging contracts with suppliers.E. Retire old low capacity and less fuel efficient aircrafts.F. Use efficient information system that allows their passengers to reserve seats and buy tickets a week or even a month before. And keep track of every passengers flying detail to provide frequent flyer discounts.

G. Boarding time and introduce online check in for passengers.H. Labor and security costs.I. Use of only one kind of planes so the airline does not have to buy different parts for different planes. This will reduce maintenance, repair and also pilot's cost as the airline does not have to train their pilot for all kind of planes.J. Partnership with different hotels and car rentals to provide customer an extra facility.K. Travel agents who are working from home will reduce the overhead cost of airline.L. Make passenger chose the kind of food he/she likes to be served in flight, through online means, this will transfer the food cost back to the passenger.M. Make employee contracts as HR Processes (recruiting, selecting and training) cost can be humongous for airlines.N. Allow employees to access top management anytime and empower employees to make customer services decision to some extent this will develop a sense of freedom in them and will provide good services.O. Some people also value more comfort than money so delta is best for those.Bibliographyhttp://money.howstuffworks.com/personal-finance/budgeting/budget-airline4.htmhttp://articles.economictimes.indiatimes.com/2014-03-02/news/47799779_1_lowest-fares-last-minute-fares-spicejethttp://www.deltagroup.ky/2014/03/delta-continue-expansion-with-launch-of-fiduciary-services-subsidiary-delta-fs/http://news.delta.com/index.php?s=20308http://www.travelweekly.com/Travel-News/Airline-News/Delta-plans-to-launch-low-cost-subsidiary/https://book.jetblue.com/B6/webqtrip.html?_flowExecutionKey=_c7FD5167E-8404-2ABE-F2C7-9C78356CC665_kA5F49CA4-D43F-43FB-A96E-6DF9F9A00F35http://www.seatguru.com/airlines/JetBlue_Airways/JetBlue_Airways_Airbus_A320.phphttp://en.wikipedia.org/wiki/JetBluehttps://flightfox.com/tradecraft/how-do-airlines-set-priceshttp://www.prnewswire.com/news-releases/zacks-industry-outlook-highlights-boeing-embraer-delta-air-lines-jetblue-airways-and-united-continental-235393701.htmlhttp://www.slideshare.net/askurdal/delta-airlines-business-strategyhttp://www.slideshare.net/friscalistya/service-recovery-jet-blue-lion-air

Cost Accounting| Job order costing