GEZ Bhd is the major oil company in Malaysia has conducted two chief concerns. which is the fuel concern and the convenience shop concern. Under the fuel concern. the gasoline Stationss sold Petrol Ron 95 ( R95 ) . Petrol Ron 97 ( R97 ) . and Diesel. Mr Aiman was as an Area Manager is responsible for directing the gross revenues activities of more than 20 gasoline Stationss in the northern part of Malaysia. They are holding a trouble to prolong in the concern even though they are in the stable concern section and consistent in the long tally. This is due to the deficiency of cognition in finance and costing which is it contributed to the concern failure. There were disadvantages associated with a gasoline station that is the fuel concern had a really low net income border. It was of import that operators manage their hard currency aggregation really good. Gaining the importance of direction accounting constructs. Mr Aiman believed that the traders and their relevant staff should hold the cognition in cost accounting.
In order to roll up informations and construct fiscal theoretical account. Mr Aiman has sought the advice from Rizal. a trained direction comptroller. To get down developing a CVP theoretical account. Rizal has gathered the necessary informations from Baron Service Station ( BSS ) which is the busiest gasoline station in the metropolis. The gasoline station had four pumps for gasoline and one for Diesel and the entire figure of nose was 20. The theoretical account that he would develop could be applied by gasoline station operators of the same class. Sing this instance. from the cost-volume-profit analysis. Rizal can happen that the breakeven point which is how much gross revenues the gasoline station of this type should bring forth from each of the fuel merchandises and the Selesamart. Mr. Aiman besides can larn that the importance of differentiate between fixed cost and variable cost so that the gasoline Stationss can prolong their profitable concern and growing.
Data Analysis
- How moneymaking is the gasoline station concern?
To find how moneymaking is this concern. we need to place eachconstituent with elaborate computation of the income statement which is does include all the gross acquired. fixed cost and variable cost that related to the both type of the concern. First. we required to understand the definition of each constituent. Fixed costs are defined as disbursals that remain more or less unchanged irrespective of the end product degree or gross revenues gross. within the relevant period. By definition. there are no fixed costs in the long tally. because the long tally is a sufficient period of clip for all short-term fixed inputs to go variable. Variable costs are defined as disbursals that vary depending on the end product degree or gross revenues gross of a company within the relevant period. By and large. as a business’s end product additions. variable costs besides increase. The more merchandises a concern sells. the more money it spends on stuffs and manpower to bring forth those merchandises. We categorized all the disbursals into fixed and variable costs and cipher the net net incomes of Baron Service Station for twelvemonth 2009.
As describe in the Calculation stated above. the entire part border of Baron Service Station consists of two parts. which are fuel concern and SelesaMart concern. Entire part border is RM1. 166. 341. 94. Contribution border of SelesaMart concern is about more and less 20 % of the entire part border. which means that SelesaMart concern is making good. in add-on. net income of SelesaMart will be higher if it doesn’t need to pay a 5 % royalty to GEZ. From the income statement we can construe that this concern in moneymaking plenty with a good control of disbursals and Cost related to the operation. where BSS could bring forth Nett Profit of RM 772. 825. 94 ( Calculation every bit per as Attachment 1 )
- Since the border on fuel concern is really low ( 6 % ) compared to convenience shop ( 20 % ) . make you hold that the convenience shop is subsidising the fuel concern?
First. the net income border for fuel concern is really low if compared to convenience shop. The fuel concern merely gets approximately 6 % of net income border for twelvemonth 2010.Net income = Gross saless – cost= 100 % – 94 %= 6 %This is because GEZ Petrol merely gain a few part of net income from the gross revenues of each liter of Ron 95. Ron 97 and Diesel. Below is the net income for each liter of fuel sold by GEZ Petrol Station and the net income border for each type of fuel. Merchandises
Price per literCost per literNet income per literNet income border ( % )Ron 95RM1. 80RM1. 6856RM0. 11446. 36Ron 97RM2. 05RM1. 9356RM0. 11445. 58DieselRM1. 80RM1. 7388RM0. 06123. 40
Besides that. the gasoline station besides can non increase the monetary value even though the authorities increase the monetary value of fuel. In the short tally. the border per liter would stay the same. For illustration. if the authorities announced therewould be a 40 cents addition in the monetary value per liter. so. operators besides have to pay 40 cents higher. So. the net income border will non increase.
From the above computation. it shows that the net income border will non increase due to increase in monetary value. Although the net income border for fuel concern is lower than net income border for convenience shop. but the gross addition from fuel concern is far better than convenience shop. For illustration. from the monthly mean gross revenues of RM 1. 7 million ; where the big part of this sum is come from fuel concern ( RM 1. 6 million from the gross ) . while merely RM 0. 1 million comes from convenience shop. In add-on. in twelvemonth 2009. the gross revenues gross of the gasoline station is RM 20. 682. 189. 60 and about RM 19. 251. 897. 60 of the sum comes from fuel concern ; which is about 93. 08 % ( RM 19. 251. 897. 60/ RM 20. 682. 189. 60 ) of the gross. While. merely 6. 92 % ( RM 1. 430. 292/ RM 20. 682. 189. 60 ) comes from convenience shops. So. in this state of affairs. it show that the fuel concern itself are able to prolong the concern of gasoline station even without convenience shop because the convenience shop merely contributed a small part of their income.
Other than that. most of the clients who come to petrol station are to refuel instead than store at the convenience shop. Merely a few clients will purchase at their convenience shop because if person wants to purchase nutrients or other day-to-day demands. they will prefer supermarket as they have more picks compare to convenience shop. So. big part of grosss or income that flow into the company is from the gross revenues of Ron 95. Ron 97 and Diesel. Even though the net income border for fuel concern is little but the gross is far better compared to convenience shops. Therefore. the convenience shop is non subsidizing the fuel concern alternatively both fuel concern and convenience shop had contributed to sustainability of GEZ Petrol Station.
- If the authorities raised the RON95 monetary value to RM2. 10. do you expect the profitableness of the concern will be eroded?
If the authorities raised the Ron 95 monetary value to RM 2. 1 per liter. the profitableness of concern will be affected significantly. The alterations of RON95 monetary value from RM1. 80 to RM2. 10 per liter has incremental monetary value of RM 0. 3 per liter. In analogue. cost per liter of Ron 95 besides will increase RM 0. 2788 from RM 1. 6856 to RM 1. 9644 per liter due to appraisal of cost on monetary value proportion of 93. 64 % . Entire Net net income for RM 1. 8 ( Ron 95 ) is RM 766. 706. 02 and had addition to RM 924. 046. 16 when Ron 95 monetary value increased to RM 2. 1. Net net income border had addition from 3. 71 % to 3. 98 % . For Break- even Analysis. the addition of Ron95 monetary value has indicate a better consequence which merely required 3187559. 208 litres/ RM 6. 936. 231. 66 compared to 3618188. 562 litres/ RM 7. 015. 784. 34 to accomplish nothing net income. In overall. rise of Ron95 monetary value by authorities will profit GEZ petro station’s fiscal public presentation. It has higher profitableness and capable to accomplish Break Even Point with a lower end product degree compared to old monetary value which RM 1. 8 per liter for Ron 95. Below are the alterations of GEZ fiscal public presentation if Ron95 monetary value changed.
- If a recognition card sale is reduced from 40 % to 20 % . what is the consequence on overall profitableness?
Nowadays more and more people are utilizing recognition card in their day-to-day life. Peoples prefer recognition cards because they are convenient to utilize and it is easier to take them alternatively of transporting a batch of hard currency. And if billfold or bag is stolen. we can merely name the creditor and shut the recognition card history before anyone uses the card. In GEZ gasoline station. gasoline operators had to face was the increasing cost of recognition card fees paid to bank as more and more of their clients were get downing utilizing credits cards. When a driver pays for gas with a recognition card. GEZ gasoline station must pay an mean 1 % of the gross revenues monetary value to the bank to treat the payments.
GEZ gasoline station have accounted that the recognition card gross revenues are about 40 % of their entire gross revenues. Research are made to the Baron Service Stations ( BSS ) . a gasoline station that was located in a metropolis. in the northern part of Malaysia. It was one of the busiest gasoline Stationss in the metropolis. In twelvemonth 2009. BSS generated gross revenues gross of RM 19. 251. 897. 60. 40 % of the gross RM 7. 700. 759. 04 was come from recognition card gross revenues and the bank will bear down RM 77007. 59 from the recognition card gross revenues. Those fees are so high. it already slim net income borders and made it difficult for Stationss to do money on gas gross revenues. Otherwise when the recognition card gross revenues is cut down to 20 % of the gross RM 3. 850. 379. 52 was come from recognition card gross revenues and the bank will bear down RM 3. 850. 3. 80 from the recognition card gross revenues.
Based on the computation above. when the recognition card gross revenues been adjusted from 40 % to 20 % it will impact the overall profitableness of the company. The income statement showed the addition of net net income from RM 772. 825. 94 to RM 811. 329. 73 of RM 38. 503. 79. When the recognition card gross revenues lessening. a 1 % fees was charged by the Bankss besides will cut down and this consequence the variable cost for the company from before alteration cost is RM 18. 300. 099. 46 to after alteration cost of RM 18. 261. 595. 67. The difference between both of the cost and company managed to salvage is RM 38. 503. 79.
The increasing of the sum in utilizing recognition card to do payment in the gasoline station will besides increase the cost of recognition card fees that need to pay to Bankss. indirectly it will give consequence to the profitableness of the station. The net income of the station will diminish due to the increasing of cost. If increasing of clients chooses to do payment by hard currency alternatively of recognition card. so the profitableness of the gasoline station will increases. because the excess cost on the recognition card gross revenues that they bear will be cut down. To cover the job. gasoline Stationss can switch the cost of recognition card charge by charges back the client when they use cards. However petrol Stationss need to take hazard that they possibly will losing client. Customer possibly will make up one’s mind to alter to other gasoline Stationss that do non hold any charge when they use recognition card to do payment. Petrol station besides can offer a cash-only price reduction. This may pull more client make payment by utilizing hard currency.
- What is the appropriate footing to apportion the teller cost between four merchandises Ron 95. Ron 97. Diesel and SelesaMart?
To delegate the costs of merchandises. we use cost allotment as it is a tool that can assist director to track the cost that associated more efficient. Costss are allocated to obtain coveted motive because it sometimes made to act upon direction behavior and therefore advance end congruity and managerial attempt. Alternatively. it is used to calculate income and plus ratings and to warrant costs or obtain reimbursement because sometimes monetary values are based straight on costs. or it may be necessary to warrant an recognized command. From the information given in the instance. GEZ gasoline station conducted two chief concern which is the fuel concern and the convenience shop concern. known as SelesaMart. Since GEZ provide joint provide. therefore the appropriate footing is gross revenues value at split-off point. The sum-up of monthly mean gross revenues.
Then. we need to cipher entire gross for R95. R97. Diesel and Selesamart. Thus we multiply gross revenues per liter with monetary value per liter to acquire the sum of gross. As stated in the instance the gross revenues gross that BSS generated is RM20. 682. 189. 60 that are comprise RM19. 251. 897. 60 of fuel gross revenues and RM1. 430. 292 of SelesaMart gross revenues.
For BSS. they can apportion more cost to Petrol Ron 95 since it contribute the highest gross which is RM 15. 277. 287. 20 continue with Diesel with RM 3. 666. 729. 60. For Petrol Ron 97 and SalesaMart. BSS can apportion less cost since it contributed merely RM357. 880. 80 and RM1. 430. 292. In BSS there were two tellers working at the gross revenues counter. One will concentrate on the fuel minutess. and one for the store. even though they handle both minutess at times and overall there were 6 tellers working for BSS. Monthly salary per individual for the teller is RM950. So BSS shall pay RM5. 700 to their 6 tellers and RM68. 400 in yearly. The appropriate footing to apportion the teller cost between the four merchandises RON95. RON97. Diesel and SelesaMart is we calculated the gross for the four merchandises and we divided with the entire gross revenues to happen the per centum for each merchandises. So the per centum for merchandise RON95 is 73. 63 % . RON97 is 1. 73 % . Diesel is 17. 73 % and SelesaMart with 6. 92 % .
After we find the per centum. we calculated the teller cost for each merchandise. To happen the teller cost. we multiple the per centum with the entire one-year wage for the teller which is RM 68. 400 ( RM 950 x 6 x 12 ) . The consequence is. for the merchandise RON95 the teller cost is RM50. 359. 58 followed by RON97 is RM1. 183. 58. Diesel is RM12. 126. 58 and SelesaMart is RM4. 730. 25. The entire teller cost is RM68. 400.
The pick of method for apportioning common costs should depend on the easiness of application. the sensed quality of information reported to external parties. and the sensed equity of the allotment when multiple merchandise directors are responsible for joint merchandises. However. as discussed above. the allotment of common costs is arbitrary. and no method is conceptually preferred to any other method. All methods of apportioning common costs across joint merchandises are by and large useless for operational. selling. and merchandise pricing determinations.
- Is public-service corporation cost fixed or variable? What difference does it do to the breakeven point of Ron 95 if it is classified as I ) fixed cost. and two ) variable cost?
In our sentiment public-service corporation cost is fixed cost. This is because. the cost will be comparatively the same as it was used for all the clip. This cost wont consequence the unit sold even though it non used.
If the public-service corporation is fixed cost. the Break Even Point in RM is higher comparison to the public-service corporation cost as variable cost. Lapp goes to the Break Even Point in Unit. which is the public-service corporation as fixed cost is higher comparison to the public-service corporation as variable cost.
Decision
Sing this instance. from the cost-volume-profit analysis. Rizal can happen that the breakeven point which is how much gross revenues the gasoline station of this type should bring forth from each of the fuel merchandises and the Selesamart. Mr. Aiman besides can larn that the importance of differentiate between fixed cost and variable cost so that the gasoline Stationss can prolong their profitable concern and growing. If the public-service corporation is fixed cost. the Break Even Point in RM is higher comparison to the public-service corporation cost as variable cost which is RM5. 024. 702. 71 compared to RM4. 154. 075. 59. Lapp goes to the Break Even Point in Unit. which is the public-service corporation as fixed cost is higher. 2. 791. 501. 50 comparison to the public-service corporation as variable cost 2. 307. 819. 77 To delegate the costs of merchandises. we use cost allotment as it is a tool that can assist director to track the cost that associated more efficient.
Costss are allocated to obtain coveted motive because it sometimes made to act upon direction behavior and therefore advance end congruity and managerial attempt. Alternatively. it is used to calculate income and plus ratings and to warrant costs or obtain reimbursement because sometimes monetary values are based straight on costs. or it may be necessary to warrant an recognized command. From the information given in the instance. GEZ gasoline station conducted two chief concern which is the fuel concern and the convenience shop concern. known as SelesaMart. Since GEZ provide joint provide. therefore the appropriate footing is gross revenues value at split-off point.
