Southwest Airlines Essay Sample

Southwest Airlines is one of the most successful air hoses in the universe. Their success comes from many different beginnings within the company. Today. most air hoses are strictly focused on growing. and tend to “nickel and dime” their clients to do up for net income losingss. Southwest. on the other manus. has put an increased focal point on their clients. They’re invariably endeavoring to supply low ticket monetary values and first-class client service. Southwest has been able to do a net income 39 old ages in a row. Even post 9/11 when most companies were registering for bankruptcy. Southwest was able to do a net income ( Anonymous. 2010 ) . Southwest’s directors have been able to make this by maintaining costs low and doing determinations different from other air hoses. More specifically. Southwest Airlines has focused on CVP analysis. activity-based costing. budgeting. and duty accounting to maintain their costs low. CVP Analysis

Cost-volume net income analysis is a critical tool in assisting directors make determinations about how certain factors will impact net incomes. These determinations include what merchandises and services to offer. what monetary values to bear down. what marketing scheme to utilize. and what cost construction to implement ( Brewer. Garrison. & A ; Noreen. 2013 ) . Southwest Airlines decided to offer no first category seating. This allows for more seats on the aeroplane and better use. Besides. Southwest merely uses the Boeing 737 aeroplane in its fleet. Using merely one type of plane cuts down on fix costs. supports stock list costs down on parts. and cuts costs on developing pilots and care crews ( Anonymous. 2010 ) . The air hose besides decided to offer no in-flight repasts to clients. Southwest flights are typically really abruptly within the United States ; hence cutting out a repast can maintain the cost of the flight depression. Some clients want to wing internationally. but Southwest offers no international flights. International flights can be really expensive for clients and air hoses. hence Southwest decided non to do them available. Activity-Based Costing

Southwest Airlines has moved to the more effectual activity-based costing system. Traditionally. companies would utilize plant-wide or departmental overhead rates that lead to inaccurate assignment of costs ( Brewer. Garrison. & A ; Noreen. 2013 ) . Activity-based costing assigns certain activities different overhead rates. The many different overhead rates are linked straight to certain merchandises or services. By making this. Southwest discovered most of the cost incurred for flights was spent on the land at airdromes. More flights in the air will gain Southwest more net incomes. They so devoted more clip to developing land crews. allowed more horizontal leading. and rewarded originative thought. Subsequently. they were able to cut their turnover clip at the airdrome Gatess by half to 20 proceedingss ( Anonymous. 2010 ) . Quicker turnover times increased the figure of flights made at each gate. Budgeting

Budgeting forces directors to believe about the hereafter and do ends for the company. Once programs have been made. directors so gather feedback as to whether or non the company is remaining on undertaking. From at that place. they will besides do determinations about necessary alterations. Traditionally. top-level direction will hold several meetings about the budget. At Southwest Airlines. a less top-down method is used called a flexible budget. Flexible budgets take into history how alterations in activity affect costs ( Brewer. Garrison. & A ; Noreen. 2013 ) . Directors at each degree will compare an estimation of their gross against existent costs every one-fourth. This allows Southwest to do alterations more easy in an ever altering concern environment. Responsibility Accounting

Southwest Airlines has a really decentralised direction system. Lower degree directors are given big sums or duty. For illustration. Southwest has ground station directors that hire new employees. develop new employees. forming and oversing professional maps. occupation scheduling. and covering full scope of the land crew operations ( Anonymous. 2010 ) . Basically. these directors have to run their ain concern. In Southwest’s system. these directors are held responsible for any divergences from budgeted ends and existent consequences. Decision

Southwest Airlines customer-oriented attack and attending to costs has earned them great success over the old ages. Some of the determinations made by direction are non ever popular. but ever concentrate on maintaining costs down. Specifically. direction used CVP analysis. activity-based costing. budgeting. and duty accounting to maintain their costs from transcending their grosss. Hopefully. Southwest continues to do the tough determinations that made them. and they can retain their place as one of the top air hoses in the United States.

Mentions

Anonymous. ( November. 2010 ) . Southwest Airlines: Case Study in Managerial
Accounting [ Information Blog Post ] . Retrieved from hypertext transfer protocol: //official- information. blogspot. com /2010/11/southwest-airlines-case-study-in. hypertext markup language Brewer. P. C. . Garrison. R. H. . & A ; Noreen. E. W. ( 2013 ) . Introduction to Managerial

Accounting ( 6th ed. ) . New York. New york: McGraw-Hill.