Boeing Airplane Manufacturing Company - Essay Example

? Boeing Airplane Manufacturing Company January 19, Part 40 Management includes making decisions. The research focuses on Boeing Airplane Company. The research centers on Boeing’s plan to enter the very large commercial transport or VLCT unit market segment. Boeing should pursue its VLCT production and marketing plans. (1). All relevant and reliable information are needed to make a decision about whether to pursue developing and manufacturing a very large commercial transport (VLCT). First, Boeing needs the prior revenue information as a basis for determining whether to pursue developing and manufacturing a very large commercial transport or VLCT unit. The business will not survive without revenues. Thus, the issue on whether to produce the super jumbo (A3XX) or the larger 747 version is grounded whether revenues are generated (Weetman, 2006). Second, Boeing needs to determine the cost and expense information to serve as a basis for determining whether to pursue developing and manufacturing a very large commercial transport or VLCT unit. Boeing Airplane Manufacturing Company must determine the total cost of buying each airplane part from its many suppliers. Likewise, the company must know the cost of labor to produce each airplane unit. Lastly, the Boeing Airplane Manufacturing Company must know the total manufacturing cost of producing each very large commercial transport or VLCT unit. The cost portion will contribute to better Boeing Airplane Manufacturing Company decision making in terms of pursuing the super jumbo or larger 747 version production. Third, Boeing needs to scrutinize the amount of profits generated as a basis for formulating more effective finance decisions. The company will proceed with the manufacture of the Boeing plane only if the net profit crops up. In the net profit computation results to a net loss figure, the company must drop the plan to develop and manufacture a very large commercial transport (VLCT) unit. (2) In terms of relevance of information, the cost and expense revenue information has high relevance value in relation to the decision to develop and manufacture a very large commercial transport or VLCT. The revenue information affects the financial report’s net profit outcome. Net profits will result only if the revenues are higher than the total costs and expenses. The $20569 subtotal revenue indicates that the company may generate enough very large commercial transport or VLCT unit revenues to generate the required bottom line net profits. In terms of relevance of information, the profit information has high relevance value in relation to the decision to develop and manufacture a very large commercial transport or VLCT. Boeing Airplane Manufacturing Company will not pursue the production of very large commercial transport or VLCT units if net profits are not realized within one or more accounting periods. A net profit figure discourages management from pursuing or continuing the production of very large commercial transport or VLCT units. The company must exert efforts to ensure net profit crops up during each accounting period. (3) In terms of reliability, the revenue and profit information has high reliability. The case study shows that the company generated $20,569 in 1993E. Likewise, the revenue information shows that the company consistently generated profits from 1989 to 1993E. The information persuades management to predict the very large commercial transport or VLCT unit will generate revenues (Weetman, 2006). In terms of reliability, the cost and expense information has high reliability, including 5.5 % risk free interest bonds. The case study shows that Boeing Airplane Manufacturing Company buys the airplane parts (wings, tires, etc.) from several suppliers. The cost information, including the $5 billion to $20 billion amount, shows whether the company’s revenues are high enough to generate gross profit figures. The gross profit result shows whether there are enough funds to pay for the Boeing Airplane Manufacturing Company marketing and operation expenses. (4) All the above information is needed for the decision to pursue the company’s very large commercial transport or VLCT unit marketing plan. Relevant and reliable revenues and costs will persuade management to pursue the big airplane plans. Relevant and reliable expense, profits, market segment, and architectural design information affects management’s decision to pursue the big airplane production plan. (5) The quality and outcomes of the management decision making using this decision as an example will generate better management decisions. The reliable information will persuade management to pursue or discard the very large commercial transport or VLCT unit plans. The relevant information will affect Boeing management’s decisions. Part 2 (30%) Balanced Scorecard The balanced scorecard focuses on the maximization of the four perspectives. Financial perspective and customer perspective must be enhanced. Internal perspective must focus on operations, customer, innovation, and regulatory and social process. The internal perspective affects the customer perspective. The learning and growth perspective focuses on the human capital, information capital, and Organizational capital. (Please see Appendix A) Part 3 (20%) Financial Statement Analysis You have been asked to perform a financial statement analysis for Boeing’s management. Your analysis is limited to only five ratios. Identify the five most important ratios you would use for that analysis, and state why these ratios are the most relevant and important to Boeing. There are several ratios to help Boeing Management’s decision making activities. First, the return on investment indicates how long manage will recover its investments. Next the gross profit ratio indicates the percentage of gross profit in relation to the company’s net revenues. Third, the net profit ratio indicates the percentage of the company’s net profit to the company’s net revenues. Fourth, the Debt to Equity ratio shows the percentage of the company’s total liabilities to the stockholders’ equity. Lastly, the current ratio indicates if there are enough current assets available to pay the currently maturing current liabilities (Weetman, 2006). Part 4 (10%) Income Statement  VLCT unit market segment 1991   in $ millions Revenues 23,000.00 Costs 18,687.50 Gross Profit 4,312.50 Expenses (including loan interest) 517.50 Net profit before tax 3,795.00 Tax 1,062.60 Net profit after tax 2,732.40 Based on the above discussion, Boeing management makes decisions. Boeing Airplane Company uses relevant financial information for its decision making activities. The company uses reliable financial information to scrutinize entry into the very large commercial transport or VLCT unit market segment. Indeed, Boeing must implement the profitable VLCT production and marketing strategies. Reference: Weetman, P. (2006). Financial and Management Accounting. New York: Prentice Hall Press. Appendix: Long Term Boeing Shareholder Value Financial Perspective Improve Cost Structure by reducing avoidable costs and expenses by 10 percent Increase asset Utilization to increase profits by 10 percent Increase revenues by purchasing new large planes by 10 percent. Enhance customer value by venturing into the new Big plane market segment on each big plane Customer Perspective Offer ^ reasonable prices in relation to competitors’ prices Enhance ^ current quality by 10 percent Increase ^ client satisfaction by offering 10 percent discount to the big plane clients who go in groups. Offer more spacious plane seats Offers other^ client services like headset music and personalized Television on each big plane trip, and more food choices. Internal Perspective Operations ^ management focuses on maximization of supply chain, production, distribution, and risk management process on each big plane immediately. Customer^ management focuses on selection, acquisition, retention, and growth in terms of customer demands on each big plane immediately. Innovative^ processes focuses on research and development of big planes. Regulatory and^ Social Processes focus on compliance with environmental, safety, health, employment, and community benchmarks on each big plane immediately. Learning & Growth Perspective ^ ^ ^ ^ Human capital, information capital, and organizational capital (culture, leadership, alignment, teamwork) are harnessed to ensure culture, leadership, alignment, and teamwork benchmarks are surpassed on each big plane. Read More