How can cvp analysis be used by management

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A: Accounting information systems AIS collect and process transaction data before distributing financ Q: Stock investment transactions, trading securitiesRios Financial Co. Year A: Income statement is the statement which is prepared to present the financial performance of a firm d The building has an estimated l A: Journal entry is the process of recording the business transactions in the books of accounts for the Share capital of Tomato Ltd at 31 March was as follows: , ordinary shares at an iss The collected data is processed on SPSS 20 software combined with analyzing and comparing the results with statistical secondary data to achieve the research objectives.

Steps of the research are as follows: i entering data into excel file, checking the validity of answers, eliminating blank and incomplete answers; ii checking and cleaning data; iii analyzing data on SPSS 20 software with the following tools: Frequency statistics and mean. It is assessed on three dimensions: cost classification, cost reporting and cost allocation.

Through a reasonable cost classification, accountants can provide multi-dimensional information. Through detailed reports on variable costs and fixed costs; controllable costs and uncontrollable costs; cost factors; direct and indirect costs universities, administrators will have an appropriate cost assessment and apply it in the CVP analysis.

In terms of cost classification and tracking of operating costs, universities only track cost factors such as salaries, scholarships, outside services, etc. Other classifications include variable costs and fixed costs; direct and indirect costsfor one student; direct and indirect costsfor each department; and controllable and uncontrollable costs which are not emphasized by universities.

The percentage of universities that do not classify or track these costs is between These are necessary costs in management reports, but not yet implemented. In particular, reporting of controllable and uncontrollable costs receives the least attention, and the rate of non-implementation is Thus, reports providing useful information to the board of administrators in decision-making are not made regularly by public universities.

General cost allocation is always a concern for accountants when providing appropriate cost information for cost-bearing subjects. The actual survey shows that the general cost allocation is prepared flexibly by universities, and each type of cost has its own allocation; for example, the cost of investment in teaching materials can be allocated by the number of faculty members of the department, and training management expenditures are allocated according to the number of students managed by that department.

This flexible allocation is popularly applied by approximately The reports remain simplistic and mainly track costs factors, while other information for cost control. This shows that the board of administrators attributes great importance to the accounting information when making decisions. More detailed information for decision making is shown in Table 3. It was found that It was also found that For more details, see the comparison that is made in Figure l:.

Information used to make the decision on the unit price for lecture hours has the highest mean value of 4. The information that is not used much is the breakeven point for each course mean value of 3. Therefore, in terms of information used for decisionmaking, according to accountants of public universities, the accounting and finance department provides basic information serving as a basis for the board of administrators; specifically, the department provides information for deciding the wages of teachers, joint training courses, and sizes of repeat classes.

Accounting information is a reliable and effective basis for administrators when making decisions related to the opening of short-term training courses, joint training, repeat classes the scale and break-even pointsthereof , cost per student, and the wage of teachers.

In order to evaluate the requirements for the application of the CVP analysis in public universities in Vietnam, this paper evaluates the opinions of the financial department on the necessity of the following contents: i preparing cost reports and ii providing information for decisionmaking.

The results from Table 4 show that the finance department said that it is necessary to prepare cost reports for decision-making with mean values of 3. The information to achieve the targeted profit was appreciated the most with a mean value of 4. The survey on the CVP analysis in public universities in Vietnam shows that universities used information from this analysis in making decisions: cost classification and determining break-even point, the number of students, and determining the wage of teachers.

The research results are explained as follows:. The finance department ofuniversitiestracked costfactors separately, such as expenses for teachers salaries, bonuses, allowances, etc.

The distribution of general expenses to provide appropriate cost information to subjects bearing costs are made based on flexible criteria; accordingly, each type of cost has a reasonable allocation. From tracking these types of expenses, the finance department prepares cost reports to provide useful information about the amount and rate of each type of cost in total costs.

According to the survey results, the finance departments provide basic information for administrators, such as wages of teachers, joint training, sizes of repeat classes, and training costs for each student.

Information such as break-even points of joint programs and repeat classes are also provided by the finance department to the administrators to make appropriate decisions. This is relevant information for administrators in making decisions. When comparing the degrees of autonomy of the studied universities, all universities are concerned and use CVP information.

Specifically, totally autonomous universities are more likely to provide and use such information. This proves that the CVP analysis is more useful to administrators when universities are more autonomous. Apart from certain achievements, the CVP analysis of universities still has limitations. This information tends to mostly feature financial accounting information, reducing the role of providing information to administrators; specifically:.

The finance department of universities only tracks cost factors such as salaries, scholarships, outside services, etc. The types of costs needed for management reports, such as variable and fixed costs; direct and indirect costs for one student or for departments; and controllable and uncontrollable costs are not provided regularly.

These reports, which provide useful information for administrators in making decisions, are not prepared regularly in public universities. Information on variable costs and fixed costs serves as a basis for decision making with additional options; direct and indirect costs for each student serve as a basis for determining break-even points of training courses, training majors, and joint programs; direct and indirect costs for each department serve as a basis for decision making and cost control for each department, faculty, discipline, and campus.

In addition, general cost allocation is always a complicated issue for management accounting. Universities classify costs based on flexible criteria. However, classification of costs based on the number of students enrolled in courses; the classification of costs based on the number of staff working in departments is not used much from The reports only track costs factors while other information for cost control such as controllable and uncontrollable costs and direct and indirect costs for each department is not provided nor addressed by accountants.

Universities do not track costs separately for longterm and short-term training activities under contracts with campuses and short-term classes nor for each discipline. Therefore, it is difficult to control costs, and there are certain limitations in the provision of information to administrators to make decisions in signing contracts, opening training classes, and determining the number of students of each discipline to achieve optimal efficiency.

Information related to decision making of short-term training courses, joint training courses, repeat classes the size and break-even points thereof , cost per student, and wage of teachers are not prepared regularly; in particular, information which is not used often is the break-even point for each course with the mean value of 3.

Costs of activities in universities of universities can be divided into types of costs providing management accounting information such as dividing costs into variable costs, and fixed costs which is the initial basis to implement the application of management accounting. Variable costs are understood as the total costs that in terms of value vary according to the level of activities salaries paid to lecturers, support for students.

Fixed costs are costs which do not change in terms of value within certain capacity such as the depreciation of lecture halls, salaries paid to administrators.

After classifying costs, accountants can provide information about break-even points for each class, course, and discipline. Therefore, the paper proposes the classification of costs of universities as follows:. Fixed costs include depreciation of lecture halls, depreciation costs of machinery and equipment facilities, cars, teaching equipment , expenses for basic salaries, expenses for hiring security guards and sanitation costs which fixed periodically.

Variable costs include services purchased from outside electricity, water, lecture halls ; wages paid to lecturers; overtime wages paid to lecturers. The fixed cost is characterized by the lecture hall used for various time slots that should use the straight-line depreciation rate; then, the depreciation expense for lecture halls, machinery, and cars will be fixed under certain conditions.

This means that, when the income reaches the break-even point, the additional income will only need to offset the variable costs, and the university will start to have profits. Therefore, in the annual estimation plan, it is necessary to take into account the diversity of tuition revenues of the system by year, calculating the break-even point. If the break-even income is exceeded, the additional income after subtracting variable expenses should increase with respect to interest.

Fixed and variable costs should be tracked separately by department, course, discipline, and joint program. In doing so, CVP compares the relationship between costs of producing goods, volume of goods sold and profits. A CVP analysis is an excellent tool for gaining a macro-scale outlook on operations, expenses and general logistical efficiency. CVP analysis is an invaluable component of modern managerial accounting.

Because CVP is a simple system, it simplifies the situations it analyzes. This means it makes assumptions about those situations. CVP assumes a constant sales price per unit, constant variable costs per unit and constant total fixed costs, for instance. In addition, CVP assumes that all goods sell. To use CVP analysis, managers must know how to calculate the contribution margin, contribution margin ratio and break-even point. Discounted offers are only available to new members.

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