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AINUR IZATUL ALFIRA ANIS AMALINA NURMASTURAH SYAJARATUL DURR NURUL NABIHAH 0815016 0914134 0911768 0911868 0823368

Case Study
You are the Assistant Management Accountant of Ramli Burger Sdn Bhd, a food manufacturer. The Board of Directors is concerned that its operational managers may not be fully aware of the importance of understanding the costs incurred by the business and the effect that this has on their operational decision making.In addition,the operational managers need to be aware of the implications of their pricing policy when trying to increase the volume of sales.

Graphs of CVP relationships can be used to gain insights into the behaviour of costs and profits.These graph are useful as they can help managers understand quickly what impact an increase or decrease in sales will have on the break-even point.Also,they are able to reveal how costs change as sales volume changes.

Q1 : What are fixed costs and what does the diagram suggest about the level of fixed costs?
Fixed costs in the diagram is called STEP-FIXED COSTS. It is FIXED within a wide range of activity but will change outside that range. e.g : If a course increases by a large number of students, it will be necessary to add another section and hire another instructor.The fixed cost then jumps to another step. A curvilinear cost function cannot be represented with a straight line but instead is represented with a curve that reflects either increasing or decreasing marginal costs.

Q2 :What are variable costs and what is the significance of the gradient of the total cost line in the diagram?

Variable costs:

Change in direct relation to the volume of output

It may include to the cost of goods sold or production expenses Total variable costs: sum of the variable costs for the specified level of production

Total Cost Line: The sum of the total fixed costs and total variable cost
The total costs line parallel to the total variable cost line, but it begins at the level of the total fixed cost Gradient of the total cost line -> affected by the increases steps in the fixed costs line as the quantity has increases.

Q3 : What is the relationship between the level of activity and the sales revenue?

When the level of activity increased, the sales revenue also increased.

Q4 : Where is the breakeven point and how is it interpreted?


to breakeven point, the CVP graph reveals how the level of revenues and total cost change over different activity level. so, this graph shows that the breakeven point is zero, profit also equal to zero. The breakeven point allocate at activity A.

Q5 : Summarise the findings for each of the identified activity levels?

Sales revenue is increasing. Total cost is increasing. Fixed cost is stepped, increase at each of activity level. Profit is increasing (sales TC - FC). break-even point is increasing at level A.

Thank You for lending your ears and eyes.May this knowledge benefits everyone.amin.

Any questions? :)

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