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The Role of Cost Accounting in Etihad Airways: Analytical Essay

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Introduction

The research study seeks to explore the role of cost accounting in the Etihad Airways. The research methodology chapter helps in identifying the adopted tools and techniques by the researcher to gather the essential information and data for a purpose of analyzing the given research topic. The research methodology chapter allows the reader to evaluate the nature of the entire research study (Mackey & Gass, 2015). The main goal of cost accounting is to maintain accurate and up-to-date product costs. The cost accountants of an organization closely work with the production personnel in order to report and measure the manufacturing costs. Moreover, cost accounting in organizations helps in profit analysis, formulate the future strategies, developing the budgets and decrease the overhead costs. In order to understand the role of cost accounting in Etihad Airways, the researcher has collected both the primary and secondary data. Primary data has been collected by conducting online survey with the employees an interview session with the managers of Etihad Airways. The researcher has adopted post-positivism research philosophy followed by descriptive research design and deductive research approach.

Research Method Outline

As per the consideration of the research philosophy, the researcher has adopted the post-positivism research philosophy as it helps the researcher to access the previous research studies in more effective manner compared to the other research philosophies such as positivism, interpretivism and realism (Kumar, 2019). The researcher has used the deductive research approach as it allows more time for practice and interpretation compared to the inductive research approach. Adoption of the deductive research approach has helped the researcher to describe the research concept more quickly and explicitly (Fletcher, 2017). As per the consideration of the research design, the researcher has used the descriptive research design as it has helped the researcher to observe the participants based on an unchanged environment.

Data Collection Sources

The researcher has collected both the primary and secondary data. The secondary data has been collected from relevant books, journals, articles and websites. The researcher has used the secondary data to offer the readers a better insight into the literature review part. The researcher has collected the primary data by conducting online survey with the employees and interview session with the managers of Etihad Airways. Survey has been conducted with 35 employees and interview has been organized with 5 managers of Etihad Airways. The researcher has used Google Form to conduct the survey and has provided total 15 close-ended questionnaires to each employee. For the mangers, the researcher has provided total 5 open-ended questionnaires to each manager in order to obtain their opinion based on the role of cost accounting in Etihad Airways.

Research Analysis Method

In order to analyze the primary quantitative information gained from the survey, the researcher has used descriptive analysis method. On the other hand, the researcher has used narrative analysis method in order to analyze the primary qualitative information obtained by conducting interview with the managers. Adoption of narrative analysis has helped the researcher to represent different point of views of the each interviewed manager.

Research Sample

The researcher has used the probability sampling method in order to select the employees for the survey. In order to select the managers, the researcher has used non-probability sampling method. The researcher has conducted the survey with 35 employees and has organized the interview with 5 managers of Etihad Airways. Therefore, total sample size includes 40 respondents.

Descriptive Data Analysis

Primary Quantitative Data Findings (Survey)

1. What is your gender?

Figure 1: Survey Response

Source: (self-developed)

Analysis: As per the above survey repose, it has been identified that the female employees have viewed more interest compared to the male employees in the Etihad airways. Therefore, it can be said that the organizational management of Etihad Airways offers equal opportunity to the female employees same as the male employees. There is no gender discrimination in the workplace.

2. What is your age?

Figure 2: Survey Response

Source: (self-developed)

Analysis: As per the analysis of the above survey report, it has been identified that most of the respondents are from the age group 31-45. It specifies that the organizational management of Etihad Airways tries to retain the middle aged employees as they are both enthusiastic and experienced. 37.1% respondents are from the age group 18-30 and such respondents can be considered as the young employees of the organization. Etihad Airways also prefers the employ the young employees as they are more energetic compared to the older employees.

3. For how long you are working in Etihad airways?

Figure 3: Survey Response

Source: (self-developed)

Analysis: Most of the respondents are working in Etihad Airways from 4 to 6 years. These employees must be considered as more experienced compared to the employees who are working in the organization for 1 to 3 years. Opinions from the experienced employees will help to gain more information regarding the role of cost accounting in the Etihad Airways.

4. Does cost accounting help in analyzing cost structure of Etihad Airways?

Figure 4: Survey Response

Source: (self-developed)

Analysis: According to most of the respondents, cost accounting helps in defining the cost structure of Etihad Airways. Cost is considered as a generic term that is frequently used in the organization and cost accounting of Etihad Airways includes classification and recording of such costs. Such costs can include factory cost, selling cost and direct cost. However, few respondents have not agreed with the fact as sometimes cost accountant of the company fail to focus on controlling the cost of labor, inventory and other different overhead costs. Cost accounting of Etihad Airways helps the organizational management to develop basic distinction between the variable and fixed costs.

5. What is the main objective of using cost accounting for your organization?

Figure 5: Survey Response

Source: (self-developed)

Analysis: According to most of the respondents, the main objective of using cost accounting in Etihad airways is to ascertain the cost of services and goods. Expenses that occur while producing the airline services and goods are considered as the cost. Under the cost accounting, the costs are allocated, classified and examined with the focus to find out the total and per unit cost of the airline services and goods. Second leading objective of cost accounting of Etihad Airways is to control the cost of expenses through using different techniques such as budgetary control and standard costing. The third leading objective of cost accounting in Etihad airways is to identify the costing loss or profit by determining with revenues the costs of such airline services and products through selling which revenue have been achieved. Few respondents have also pointed out that cost accounting helps in developing difference between variables and fixed cost in order to fix the product price.

6. How far do you agree that cost accounting helps in strategic decision making of Etihad Airways?

Figure 6: Survey Response

Source: (self-developed)

Analysis: As per the analysis of the above survey report, it is confirmed that cost accounting of Etihad Airways helps the organizational management to develop the strategic decisions by developing a proper idea about the financial state of the company. Ehen the organizational management is aware of the cost, they can identify where profit level is lacking and it becomes easier for the manager to remove the extra cost that are arising and develop a better finance strategy for the business.

7. Which techniques of cost accounting you use in managerial decision making?

Figure 7: Survey Response

Source: (self-developed)

Analysis: According to most of the respondents, managerial costing technique is used in the Etihad Airways. By this costing technique, the organizational managers can decide the number of units or airline service to be delivered or produced. On the other hand, historical costing is identified as the second leading technique used in the Etihad airways that helps the comparing all the costs after performance of the entire service or process. Few respondents have selected standard costing as the most used techniques that is mainly used to compare the incurred cost with the predetermined cost of the airline service. Direct costing cannot be considered as the most used technique of cost accounting as it has got the least vote.

8. What is main function of cost accounting in Etihad Airways?

Figure 8: Survey Response

Source: (self-developed)

Analysis: According to most of the respondents, cost accounting helps the organizational management of Etihad Airways to prepare the budget by recording the cost according to the predetermined and pre-arranged cost classification. Cost accounting also helps in analyzing the profit by measuring the profit received or earned on each service and to advice the organizational management on improving the profits. Fixing of the selling price has been identified as the third leading function of cost accounting used in Etihad as it offer essential data to fix the selling price. Cost analysis helps in identifying the relation between cost and different cost determinants.

9. How far do you agree that cost accounting helps the organizational management of Etihad Airways to develop better understanding of the variable and fixed cost?

Figure 9: Survey Response

Source: (self-developed)

Analysis: Most of the respondents have agreed with the fact cost accounting helps the organizational management of Etihad Airways in developing better understanding on the fixed and variable cost by developing differentiation between the variable and fixed cost. It allows the organizational management to identify the most ideal price for the airline price.

10. Does cost accounting helps in improving resource planning and allocation?

Figure 10: Survey Response

Source: (self-developed)

Analysis: Most of the respondents have agreed with the fact that cost accounting improves resource planning and allocation of Etihad Airways as the cost accountants of this organization have better understanding on the nature and scope of cost accounting. By developing better understating on the fixed and variable cost, the organizational management of this company can optimize the budget and allocate the resources where they are required most.

11. Which methods your organization uses for costing?

Figure 11: Survey Response

Source: (self-developed)

Analysis: Job costing has been identified as the leading method of cost accounting used in the Etihad Airways as it helps in analyzing the cost incurred for a specific job such as customer service and employee salaries. On other hand, unit costing is the second leading technique that is used by the cost accountant of Etihad to analyze the cost incurred for fixed quantity. Operating costing method is identified as third leading method used in cost accounting of Etihad to measure the cost incurred for the rendered service.

12. Do the managers of Etihad Airways use the reports of cost accounting to better price the products?

Figure 12: Survey Response

Source: (self-developed)

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Analysis: according to most of the respondents, cost accounting reports help the organizational management of Etihad Airways to better price the products by analysing, track and record the cost of airline service supplies. The organizational management can also determine the fixed cost such as employee salary.

13. What are the major benefits obtained by cost accounting?

Figure 13: Survey Response

Source: (self-developed)

Analysis: According to most of the respondents, the main benefit of cost accounting is that it helps in controlling the costs by identifying the extra costs incurred in the business and removing them as soon as possible. Offering of essential cost information has been identified as the second leading benefit of cost accounting. In addition to that, cost accounting helps in disclosing the profitable and non-profitable activities by eliminating the activities that cause losses to the firm.

14. What are the major issues in cost accounting used in Etihad Airways?

Figure 14: Survey Response

Source: (self-developed)

Analysis: The main issue of cost accounting in Etihad Airways is failure to forecast the cost and extra cost that can decrease the profit margin. In addition to that, often the cost accountants of this company fail to identify the improvement opportunities that generate waste and enhance the resource consumption. Poor support from the inter-organizational cost management increases the expenses cost of the company.

15. What are the consequences of not isolating the issues of cost accounting?

Figure 15: Survey Response

Source: (self-developed)

Analysis: According to most of the respondents, not isolation of the issues in the cost accounting lead to inaccurate pricing of the products as the organizational management of Etihad Airways fails to differentiate between the variable and fixed cost. Poor financing of the company leads to increase in the budget.

Primary Qualitative Data Findings (Interview)

1. Which methods and techniques of cost accounting Etihad Airways uses?

Managers Response

1st Manager “Operating costing is the most preferable method for cist accounting.”

2nd Manager “Direct costing and process costing.”

3rd Manager “Job costing and standard costing.”

4th Manager “Historical Costing and job Costing.”

5th Manager “Marginal Costing and Unit Costing.”

2. What is the effectiveness of cost accounting to optimize profitability of Etihad airways?

Managers Response

1st Manager “Cost accounting aids the profit analysis”

2nd Manager “It helps in formulating the future strategies.”

3rd Manager “It makes the budget preparation easy”

4th Manager “Cost accounting helps in identifying the extra cost incurred in the business.”

5th Manager “It decreases the overhead costs.”

3. What are major issues you face related to the costing system of Etihad Airways?

Managers Response

1st Manager “Failure to forecast the future expenses”

2nd Manager “The incurred costs get higher than the expected level”

3rd Manager “Ineffective cost control system.”

4th Manager “Lack of double entry system and ignorance of the futuristic situation.”

5th Manager “Development of inaccurate financial and budgeting decision due to ineffective cost control approach.”

4. Which strategies Etihad Airways uses to manage the costing system?

Managers Response

1st Manager “Cost planning that accounts all the cost in records in effective manner.”

2nd Manager “Cost finding is used to estimate and measure the cost of each product, segment and department based on the business operations.”

3rd Manager “Cost analysis helps in determining the relation between different cost determinant and incurred cost”

4th Manager “Cost control is used effectively in Etihad by cost analysis, collection, presentation and interpretation”

5th Manager “Costs of alternative activities products and areas are compared based on the distribution and production field.”

5. How the cost accounting system of Etihad airways can be improved?

Managers Response

1st Manager “By maintaining effective cost control system.”

2nd Manager “Effective removal of the incurred extra costs.”

3rd Manager “Identifying the profitable and non-profitable activities”

4th Manager “Effective plan regarding the cost control.”

5th Manager “Carry out special cost investigations and studies that can be valuable to the organizational management to formulate the plans and determining the cost policies.”

Conclusion

The researcher methodology chapter highlights research strategies and techniques adopted by the researcher to develop the research paper in an efficient manner. Adoption of proper research methodology such as post-positivism research philosophy, deductive research approach and descriptive research design has helped the researcher to complete the research investigation in an effective manner. The researcher has pointed out that cost accounting plays significant role for the development of Etihad airways. Findings result and discussion will be represented in the next chapter.

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The Role of Cost Accounting in Etihad Airways: Analytical Essay. (2022, September 27). Edubirdie. Retrieved February 8, 2023, from https://edubirdie.com/examples/the-role-of-cost-accounting-in-etihad-airways-analytical-essay/
“The Role of Cost Accounting in Etihad Airways: Analytical Essay.” Edubirdie, 27 Sept. 2022, edubirdie.com/examples/the-role-of-cost-accounting-in-etihad-airways-analytical-essay/
The Role of Cost Accounting in Etihad Airways: Analytical Essay. [online]. Available at: <https://edubirdie.com/examples/the-role-of-cost-accounting-in-etihad-airways-analytical-essay/> [Accessed 8 Feb. 2023].
The Role of Cost Accounting in Etihad Airways: Analytical Essay [Internet]. Edubirdie. 2022 Sept 27 [cited 2023 Feb 8]. Available from: https://edubirdie.com/examples/the-role-of-cost-accounting-in-etihad-airways-analytical-essay/
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