Professional Documents
Culture Documents
Bbap2103 Akaun Pengurusan
Bbap2103 Akaun Pengurusan
<BBAP2103>
<MANAGEMENT ACCOUNTING>
0
QUESTION 1
Keemar is a production manager of Kilang Kemboja which involves in making curry puffs in
Bandar Kemaman.
Financial Accounting is the process of producing information for external use usually
in the form of financial statements. Financial Statements reflect an entity's past
performance and current position based on a set of standards and guidelines known as
Generally Accepted Accounting Principle (GAAP). This generally includes accounting
standards (e.g. International Financial Reporting Standards), accounting conventions,
and rules and regulations that accountants must follow in the preparation of the
financial statements.
BBAP2103
1. Users Managers who plan for and External persons who make
control an organization financial decisions
2. Time focus Future emphasis Historical perspective
1
BBAP2103
b) Discuss how management accounting information can assist Keemar in making
decisions in her daily production operation.
QUESTION 2
2
BBAP2103
a) Explain what contribution margin is. Then, determine the contribution margin per box
and contribution margin ratio for TT.
Contribution margin can be stated on a gross or per-unit basis. It represents the incremental
money generated for each product/unit sold after deducting the variable portion of the firm's
costs. The contribution margin is computed as the selling price per unit, minus the variable
cost per unit.
3
BBAP2103
c) Explain what margin of safety is. Then, determine the margin of safety for TT in box
and RM.
Margin of safety is the difference between the intrinsic value of a stock and its market price.
Another definition: In break-even analysis, from the discipline of accounting, margin of
safety is how much output or sales level can fall before a business reaches its break-even
point.
4
BBAP2103
d) If Teratai Trading plans to achieve a net income of RM1,499,940, determine the
number of boxes that must be sold to achieve the plan.
PROFIT=Unit CM x Q – Fixed
RM 1,499,940.00 = 90 X Q – RM 1,404,000.00
RM 1,499,940.00 = 90Q - RM 1,404,000.00
90Q = RM 1,499,940.00 + RM 1,404,000.00
90Q = RM 2,903,94.00
Q = 32,266 BOX
e) Teratai Trading is still considering an investment in new technology that will increase
fixed cost by RM200,085 per year but will lower its variable costs to 30 percent of sales.
The number of boxes sold will remain unchanged. If the investment is made, calculate the
new break-even point of TT in box and RM.
Fixed cost = RM 1,404,000.00 + RM 200,085.00
= RM 1,604,085
Variable cost = RM 1,380,000.00 – 30% = RM966,000.00
Profit = unit cm x Q – Fixed
0 = 108Q - RM 1,604,085
108Q = RM 1,604,085
Q = 14,853
5
BBAP2103
f) Elaborate the how this cost-volume-profit analysis could bring benefit to Teratai
Trading in its daily operation.
Cost Volume Profit analysis helps organizations to examine their profits, costs and prices
with respect to any changed that occur in sales volume. CVP is an effective tool that helps
accountants to engage in decision making regarding future operations (Breakeven analysis).
There are:-
Operating Leverage
Another benefit that companies gain by using the CVP approach is the operating leverage
benefit which explains how the cost structure of an organization is made up of fixed cost
processes. This is a huge benefit because the cost structure is directly related to the level of
growth and profit a company has.
Operating leverage can vary greatly from one company to another. In the firms that have a
high ratio of fixed costs as compared to the variable costs, the operating leverage is good
because it produces a high contribution margin. Similarly, higher fixed sales also mean that
the company has a higher breakeven point. A higher breakeven point is directly related to
the financial success of the company because at this point, the company can claim high
profits at a much higher rate.
Future Forecasting
By using the above mentioned models, approaches and graphs, managers can analyze the
direction in which their company is moving and this analysis might help them to better
understand the different operations and activities within the organizations. By getting
6
BBAP2103
beforehand knowledge of profits and costs, the company can manage them in a more
efficient way to increase productivity.
Preparation of Budgets
Since the cost profit volume analysis helps in determining the level of sales and thus helps
organizations to achieve their desired targets. This approach would help the managers to
prepare their budgets which consist of the costs as well as the revenues at any level of
production within the organization.
Cost Control
The biggest benefit of CVP analysis is to evaluate the cost volume changes within an
organization and the impact of these changes on revenue generation. For instance: there is a
dental hospital that wants to purchase a new dental machine so that the patient’s level of
satisfaction can be increased by reducing the time required for dental treatment. The
purchase of this new machine will tend to increase fixed costs of an organization. So, at
such complex situations, the cost volume analysis can be the most effective tool to help in
simplifying the company’s decision. If this dental hospital uses CVP analysis, it can manage
to decrease its variable costs by maintain the profit at the same desired level.
Profit Planning
The aim of any business is to create value for the customers and to get profits for the
company. However, managing all operations and costs in such a way that can maximize
profits is not an easy task. Therefore, organizations have to consider a lot of things in order
to engage in proper profit planning techniques. The CVP analysis can help the companies to
create the best and most profitable combination of cost, price and sales volume. Thus, it can
help managers to calculate and estimate their profit at different levels and for different range
of products.
Therefore, CVP is a tool which helps to calculate risk particularly in terms of costs and
volumes. After analyzing this risk, the companies can come up with efficient solutions to
reduce this risk.
7
BBAP2103
Decision Making
All the above mentioned benefits of Cost Volume Profit Analysis directly or indirectly
related to the decision making processes of a company. Any business organization has to
make a lot of decisions regarding their price, their costs, and products, fixed and variable
unit costs and so on. The CVP approach simplifies this process by providing the companies
with a breakeven point and by helping them to engage in better decision making and
planning for the future.