GAM7113 Accounting for Managers

CVP analysis assignment

Instructions:
1. Prepare general overview of your company and product.
2. Sales plan, break-event expectations, target profit any relevant information deemed necessary.
3. The unit of production could be measure by piece, weight (e.g. kilogram), carton, dozen etc.
depending on the suitability of the product.
4. You need to present your work upon the completion of your assignment.
Required:
1. Prepare a product cost sheet for the product (add rows if needed). If the fixed cost incurs annually,
determine the monthly amount by dividing it by 12.

2. Identify the period costs that are relevant to the business and complete the monthly cost table (add
rows where needed).

3. Prepare a monthly sales budget by completing the sales budget table (July to September 2023).

4. Project the monthly contribution margin by completing the projected contribution margin table.
Note: the fixed cost components shall include both product and period costs.

5. Determine the monthly break-even point.

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 BAF7014 Business Accounting and
Finance

Group Assignment II
CVP ANALYSIS
MYKUIH DELIGHT
Submission date: 12 APRIL 2024
Lecturer: Dr. Yip

Prepared by:

Student ID Student Name

1231403061 RAIDAH IRDINA DIYANAH BINTI IZAHAM
1231402942 MOHD ZUBAIR BIN SULAIMAIN
1231402944 MOHD FAHMI BIN IDRUS
1231402960 MUHAMMAD ATHARI BIN ISMAIL
1231402950 NUR HIDAYAH BINTI RUSLI

Table of Contents

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Requirement 1.......................................................................................................................................4
Product cost sheet............................................................................................................................4
Variable cost components................................................................................................................4
Fixed cost components.....................................................................................................................4
Requirement 2.......................................................................................................................................5
Monthly cost table............................................................................................................................5
Variable period costs.....................................................................................................................5
Fixed period costs..........................................................................................................................5
Requirement 3.......................................................................................................................................6
1. Sales Units:...............................................................................................................................6
2. Price per Unit:..........................................................................................................................6
3. Total Sales:...............................................................................................................................6
Requirement 4.......................................................................................................................................7
Contribution margin projection........................................................................................................7
Requirement 5.......................................................................................................................................8
1. Calculation Details...................................................................................................................8
2. Contribution Margin per Unit..................................................................................................8
3. Break-Even Point Chart............................................................................................................8
4. Monthly Break-Even Point for July – September 2023............................................................9
5. Break-Even Analysis:................................................................................................................9

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Requirement 1

Product cost sheet

Product Code KL001
Product Name Kuih Lapis
Unit of Measurement Per Piece
Variable cost components
Item
Description Quantity Cost Total
number
01 Glutinous Rice Flour 1,500 kg RM 0.50/kg RM 750

02 Coconut 600 kg RM 1/kg RM 600

03 Sugar 150 kg RM 0.80/kg RM 120

04 Packaging 12,000 units RM 0.10/unit RM 1,200

05 Cooking Gas 900 cylinders RM 30/cylinder RM 27,000

Total variable product cost per unit RM 29,670

Expected production units per month 12,000 units

Total Variable Cost Per Unit RM 2.47

Fixed cost components

Cost
Description Monthly amount
code
FC01 Rent RM 5,000

FC02 Electricity RM 1,500

FC03 Water RM 500

FC04 Salaries RM 7,000

FC05 Machinery Depreciation/Lease RM 3,000

FC06 Maintenance and Repairs RM 1,000

Total fixed product costs/month RM 18,000

Expected production units per month 12,000 units

Total fixed product cost per unit RM 1.50

Total product cost per unit (Variable + Fixed) RM 3.97

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Requirement 2
Monthly cost table
Variable period costs
# Description Monthly amount
01 Marketing Materials RM 500
02 Commission to Sales Staff RM 300
Total variable period cost per month RM 800
Expected production per month 12,000 units
Variable period cost per unit RM 0.067
Fixed period costs
# Description Monthly amount
01 Office Rent RM 1,000
02 Administrative Salaries RM 2,500
03 Business Software Subscription RM 300
04 Insurance RM 800
Total fixed period cost per month RM 4,600

Detailed Explanation
Variable Period Costs primarily include marketing materials and commissions, which vary based on
sales activities but are not directly related to the manufacturing process. These costs will fluctuate
with the level of sales effort and promotional activities undertaken each month.
Fixed Period Costs include ongoing expenses such as office rent and administrative salaries. These
costs are necessary for the business's operation but do not directly influence production volume.
These are incurred regardless of the company's production level, focusing instead on supporting the
business infrastructure and overhead.

Requirement 3
Assumptions:

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 1. Sales Unit: Based on historical data and expected growth due to seasonal variations.
2. Price per Unit: Assuming stable pricing strategy unless specified adjustments for promotions
or other marketing activities.

Sales budget
July – September 2023
July August September
Sales Units 12,000 units 12,500 units 13,000 units
Price per Unit RM 2.50 RM 2.50 RM 2.50
Total Sales RM 30,000 RM 31,250 RM 32,500

Detailed Explanation:

1. Sales Units:
a. July : Based on average sales, expected to sell 12,000 units.
b. August : Anticipating a slight increase due to promotional activities and
seasonal customer increase, setting at 12,500 units.
c. September : Projecting further growth due to ongoing marketing efforts and
possibly a festive season, estimating 13,000 units.

2. Price per Unit:

d. Maintained at RM 2.50 per unit across all three months, assuming no price change
during this period.

3. Total Sales:
Calculated by multiplying the number of units by the price per unit for each month.
e. July : RM 30,000 = 12,000 units × RM 2.50
f. August : RM 31,250 = 12,500 units × RM 2.50
g. September : RM 32,500 = 13,000 units × RM 2.50

Requirement 4
To project the monthly contribution margin for MyKuih Delight for July through September 2024,
we'll consider both the total sales, the variable costs, and the fixed costs, including both product and

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period costs. The contribution margin is calculated by subtracting the total variable costs from the
sales, and then subtracting total fixed costs from the contribution margin to find the net income.

Contribution margin projection

July – September 2024
Sales RM 30,000 RM 31,250 RM 32,500
Variable Costs:
Glutinous Rice Flour RM 750 RM 781.25 RM 812.50
Coconut RM 600 RM 625 RM 650
Sugar RM 120 RM 125 RM 130
Packaging RM 1,200 RM 1,250 RM 1,300
Cooking Gas RM 27,000 RM 28,125 RM 29,250
Total Variable Costs RM 29,670 RM 30,906.25 RM 32,142.50
Contribution Margin RM 330 RM 343.75 RM 357.50
Fixed Costs:
Rent RM 5,000 RM 5,000 RM 5,000
Electricity RM 1,500 RM 1,500 RM 1,500
Water RM 500 RM 500 RM 500
Salaries RM 7,000 RM 7,000 RM 7,000
Machinery Depreciation RM 3,000 RM 3,000 RM 3,000
Maintenance RM 1,000 RM 1,000 RM 1,000
Marketing Materials RM 500 RM 500 RM 500
Commission RM 300 RM 312.50 RM 325
Total Fixed Costs RM 18,800 RM 18,812.50 RM 18,825
Net Income -RM 18,470 -RM 18,468.75 -RM 18,467.50

 Sales, Variable Costs, and Fixed Costs are all projected based on the assumptions stated in
earlier responses and the calculated values in the cost sheets.
 Net Income is derived by subtracting Total Fixed Costs from the Contribution Margin. Note
that this is a simplistic projection and assumes no changes or optimizations in operations or
pricing, which could affect actual outcomes.
This projection highlights a critical issue: despite consistent sales growth, the high fixed and variable
costs (especially the significant cost from cooking gas) result in a projected net loss each month. This
suggests a need for a strategic review of pricing, cost management, or both to improve profitability.

Requirement 5
Formula for Break-Even Point (in Units)
The formula to calculate the break-even point in units is:

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 Break−Even Point ( units )=Total ¿ Costs ¿
Contribution Margin per Unit

Where:

 Total Fixed Costs include both product and period fixed costs.
 Contribution Margin per Unit is calculated as the difference between the selling price per unit
and the variable cost per unit.

1. Calculation Details

From the earlier discussion:

 Selling Price per Unit: RM 2.50

 Variable Cost per Unit: RM 2.47 (from detailed variable costs including ingredients
and cooking gas)
 Total Fixed Costs per Month: RM 18,800 (combining both product and period fixed
costs)

2. Contribution Margin per Unit

¿ Selling Price per Unit−Variable Cost per Unit

¿ RM 2.50−RM 2.47
¿ RM 0.03
Break-Even Point (in Units)
RM 18,800
Break−Even Point ( units )= =626,667 units
RM 0.03

3. Break-Even Point Chart

We will plot a graph showing the total costs and total revenue to visually identify the break-
even point. The x-axis represents the number of units sold, and the y-axis represents the costs
and revenue in RM.

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 4. Monthly Break-Even Point for July – September 2023

Month Fixed Costs (RM) Variable Cost Per Selling Price Per Break-Even Point
Unit (RM) Unit (RM) (Units)
July 18,800 2.47 2.50 626,667
August 18,800 2.47 2.50 626,667
September 18,800 2.47 2.50 626,667

5. Break-Even Analysis:

 Fixed Costs : RM 18,800 per month (both product and period costs included)
 Variable Cost per Unit: RM 2.47 (cost for ingredients, packaging, and cooking gas)
 Selling Price per Unit : RM 2.50
Break-Even Point in Units: Approximately 626,667 units This means MyKuih Delight would need
to sell around 626,667 units of Kuih Lapis each month to cover both fixed and variable costs,
resulting in a net income of zero. This exceptionally high break-even point suggests a major issue in
the cost structure or pricing strategy, as it significantly exceeds typical sales projections.
The chart plotted above visually represents this situation, where the blue vertical dashed line indicates
the break-even point. The red line shows total costs, and the green line represents total revenue as
functions of units sold. The intersection point of the costs and revenue lines occurs far beyond the
realistic sales range, indicating a need for urgent re-evaluation of pricing, costs, or both to make the
business viable.