three costing methods and two budgeting methods

AKL Co. is a UK airline company operating in the mid to long haul market. AKL Co. became successful due to the overall company strategy of offering excellent customer service for lower than average ticket prices.
However, in recent years the company’s reputation was negatively impacted by mixed customer reviews. Customers often report inconsistent levels of service and quality from flight to flight, such as a number of cabin crew on duty, different size in-flight meals and number of in-flight movies available.

AKL Co.’s 2018/2019 management accounts show a turnover of £165m. Turnover has continued to grow steadily at an average rate of 8% year on year for the past ten years. However, the Managing Director, Gail Zulu, is increasingly concerned with reducing gross and net profit margins. Despite the growth in sales, gross profit has fallen steadily at a rate of 2% and net profit at a rate of 4% year on year for the past five years.
You have been employed by Mrs. Zulu as a Management Accountant in order to directly address the problems of reducing gross and net profits.
After an initial investigation, you have discovered the following information:
1. AKL Co. have 30 aircrafts
2. Each aircraft has a Head Steward/ess, who is responsible for staffing each flight and stocking the plane with refreshments etc
3. The stock of refreshments etc on each airplane can differ significantly in volume, quality, and cost
4. The airline has begun to lose market share as other airlines are considered to be more innovative regarding their inflight meals and entertainment selection.
6. You have been unable to identify any set targets for gross profit levels on each flight
7. The company uses incremental budgeting. Last year’s results are adjusted for any known material changes and then inflation is added at the latest Consumer Price Index (CPI) rate.
8. Airport turnarounds (the time between the plane landing with one set of passengers and takes off with the next set of passengers) are extremely expensive. This cost seems to be increasing, but there is no recorded information on the detail of this operation.
9. There have been recent complaints from the airplane cabin crew regarding a lack of training.

This has led to a higher than usual staff turnover and is suspected to be linked to some customer complaints.

requirement:
1. compare three costing methods that may aid AKL Co. to both understand and reduce their direct costs.
2. compare two budgeting methods with the current method used at AKL Co. that will aid a reduction in overheads.