Boeing Company listed at NYSE
Boeing Company listed at NYSE is the world’s largest aerospace and defense company. There are mainly three divisions in the company. Viz., commercial airplanes, integrated defense Systems and Boeing Capital Corporation. For the year 2008, the company generated $ 60.9 billion in revenue and $ 2.7 billion as net income. Out of the three divisions, commercial airplane section is the most important division which is facing a stiff competition from EADSY. There are many fuel efficient airplanes manufactured by Boeing company. The jets and airbuses manufactured by Boeing company are very efficient in performance. The costs incurred by Boeing company can either be capital expenditure or included in other expenses.
The choice of accounting has a direct material effect on Boeing’s income. The expenses of manufacturing, purchase of raw materials, insurance, compensation and benefits to employees are directly or indirectly included in cost accounting of Boeing company. However the there are many risks associated with the company from the point of manufacturing till the point of sale of airplanes. In this process, at every stage, costs and expenses are managed to a great extent and profits are earned by increasing the selling price of each airplane. Further Boeing company must also meet the required guidelines of Environmental Protection Agency (EPA) and a cost-benefit-analysis is made under Nuclear Regulatory Commission guidance.
One of the divisions of Boeing company applies the following considerations for evaluation of risk.
Benefit : Risk is always considered as a serious situation and matrix of risk and improvement can be calculated and constructed which indicates that low risk and little improvement yields low benefits whereas high risk and large improvements yield high benefits.
Impact : Proposed risk always leaves an impact on certain segment of areas or a sect of people. It is important to take note that how many number of people are being affected by the intervention.
Feasibility : An assessment of developments required for implementing a control. Some solutions are available off-the-shelf and others require certain time range.
Cost : An estimation of Dollar values can be estimated or classified with a range from low to high estimation. (William N.Rom, Steven B.Markowitz, Environmental and Occupational Medicine, page 919)
As of June 2009, 1,416 aircrafts have been built and Boeing Current Market Outlook 2008-2027 projects $3.2 trillion in aircraft financing opportunities. Boeing company meets the demand of domestic and international market which requires a clear analysis on strategic risk and cost evaluation both at manufacturing level and at marketing level.
All strategical risks have to be divided into phases and an estimation of probabilities of each phase can be prepared. Definite decisions, cash flows can also be prepared with the proposed scenarios at each phase of strategical risk.
The costs and expenses incurred can be analysed and segregated in order to allocate the expenditure either to capitalization or to expenses. The company always focuses on capital expenses instead of operating expenses as the company will maintain its profits by cutting its costs to a maximum level. Further the company must also meet the accounting standards of GAAP.
Managerial cost accounting details about activity-based Costing which provides daily cost information to the company. Chief Financial Officers Act 1990 contains several provisions of Managerial Cost Accounting standards. Further to this, Federal Financial Management Improvement Act 1996 (FFMIA) provides that the systems of CFO must comply with the federal accounting standards and federal financial management system requirements.
Managerial Cost Accounting Practices
Accessed 5 August 2009