Understanding Organisational Context by yaofenjin

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									  Business and Its Environment


                Chapter 5
                Accounting
  Introduction to management and financial accounting
Differences between management and financial accounting
               Cost-volume-profit analysis
Definition of accounting
The process of identifying,
measuring and communicating
economic information to permit
informed judgements and decisions
by users of the information.
   The users of accounting
        information
• Internal parties within the
  organisation;
• External parties such as
  shareholders, creditors and
  regulatory agencies, outside the
  organization.
Management accounting
• Management accounting is
  concerned with the provision of
  information to people within the
  organisation to help them make
  better decisions and improve the
  efficiency and effectiveness of
  existing operations.
     Financial accounting

• Financial accounting is
  concerned with the provision of
  information to external parties
  outside the organisation.
    Differences between management
   accounting and financial accounting
• Legal requirements
• Focus on individual parts or
  segments of the business
• Generally accepted accounting
  principles
• Time dimension
• Report frequency
         ACCA and CPA
• ACCA (The Association of Chartered
  Certified Accountants)
• CPA (Certified Public Accountant)
• 财务报表编制(Preparing Financial
  Statements)
• 财务信息与管理(Financial Information
  for Management)
• 人力资源管理(Managing People)
• ……
      四大国际会计师事务所
在国际上,是指(2009年数据):
• 普华永道(PWC),收入281.8亿美元,从业人
  员116935人。
• 德勤(DTT),收入274亿美元,从业人员
  124000人。
• 安永(Ernest & Young),收入245.2亿美元,
  从业人员99203人。
• 毕马威(KPMG),收入226.9亿美元,从业人员
  93000人。
• 排名第五的德豪国际收入为51.45亿美元,与四大
  的差距非常大。
         Variable costs
• Short-term variable costs vary in
  direct proportion to the volume
  of activity;
• Total variable costs are linear
  and unit variable cost is
  constant.
          Variable costs
• Short-term variable manufacturing
  costs include piecework labour, direct
  materials and energy to operate the
  machines.
• No-manufacturing variable costs
  include sales commissions and petrol.
            Fixed costs
• Fixed costs remain constant over
  wide ranges of activity for a specified
  time period.
• Examples of fixed costs include
  depreciation of the factory building,
  supervisors’ salaries and leasing
  charges for cars used by the
  salesforce.
             Fixed costs
Units produced   Fixed cost per unit
                                (£)
        1              5000
       10               500
      100                50
      1000                 5
    Cost-volume-profit analysis
• How many units must be sold to break-
  even?
• What would be the effect on profits if we
  reduce our selling price and sell more
  units?
• What sales volume is required to meet the
  additional fixed charges arising from an
  advertising campaign?
• Should we pay our sales people on the basis
  of a salary only, or on the basis of a
  commission only, or by a combination of
  the two?
 A mathematical formula
net profit = (units sold × unit selling price)
- [(units sold × unit variable cost) + total fixed
   costs]

NP = net profit
 X = units sold
 P = selling price
 b = unit variable cost
 a = total fixed costs

NP = Px – (a + bx)
Norvik Enterprises operate in the leisure and
entertainment industry and one of its
activities is to promote concerts at locations
throughout Europe. The company is
examining the viability of a concert in
Stockholm. Estimated fixed costs are £ 60 000.
These include the fees paid to performers, the
hire of the venue and advertising costs.
Variable costs consist of the cost of a pre-
packed buffet which will be provided by a
firm of caterers at a price, which is currently
being negotiated, but it is likely to be in the
region of £10 per ticket sold. The proposed
price for the sale of a ticket is £20. The
managements of Norvik have requested the
following information:
1. The number of tickets that must be sold to
   break-even (that is, the point at which there
   is neither a profit or loss).
2. How many tickets must be sold to earn £30
   000 target profit?
3. What profit would result if 8000 tickets were
   sold?
4. What selling price would have to be charged
   to give a profit of £30 000 on sales of 8000
   tickets, fixed costs of £60 000 and variable
   costs of £10 per ticket?
5. How many additional tickets must be sold to
   cover the extra cost of television advertising
   of £8000?
   1. BREAK-EVEN POINT IN UNITS (I.E.
       NUMBER OF TICKETS SOLD)
      60 000 + 10x = 20x – 0
                 x = 6 000
• Contribution margin is equal to sales (Px)
  minus variable expenses (bx).

Break-even point in units
= fixed costs ÷ contribution per unit
                x = a ÷ (P – b)
 and so         x = £60 000 ÷ £10
2. UNITS TO BE SOLD TO OBTAIN
    A £ 30000 TARGET PROFIT
£30 000 = £20x – (£60 000 + £10x)
        £90 000 = £10x
and so         x = 9000 tickets

Contribution margin approach
units sold for desired profit
= (fixed costs + target profits)
   ÷ contribution per unit
x = (a + NP) ÷ (P – b)
and so          x = £90 000 ÷ £10
 3. PROFIT FROM THE SALE OF 8000
             TICKETS

NP = £20 × 8000 - (£60 000 + £10 × 8000)
   = £160 000 – (£60 000 + £80 000)

and so         NP = £20 000
4. SELLING PRICE TO BE CHARGED TO SHOW
A PROFIT OF £30 000 ON SALES OF 8000 UNITS


 £30 000 = 8000P – (£60 000 + (£10× 8000 ))
            = 8000P- £140 000
 giving          8000P = £170 000
 and                  P = £21.25
  (i.e. an increase of £1.25 per ticket)
5. ADDITIONAL SALES VOLUME TO MEET £8000
 ADDITIONAL FIXED ADVERTISING CHARGES


  The contribution per unit is £10 and
  fixed costs will increase by £8000.
  Therefore an extra 800 tickets must be
  sold to cover the additional fixed costs
  of £8000.
THE PROFIT-VOLUME RATIO (PV ratio)

   The profit-volume ratio (also known as the
   contribution margin ratio) is the contribution
   divided by sales. It represents the proportion
   of each £1 sale available to cover fixed costs
   and provide for profit.

   NP = (Sales revenue × PV ratio) - Fixed
   costs
   NP + Fixed cost = Sales revenue × PV ratio
   Therefore the break-even sales revenue
   (where NP = 0) = Fixed costs/PV ratio
     RELEVANT RANGE
Let us assume that the caterers will
charge a higher price up to 4000 tickets
sold but reductions will apply for sales
volumes in excess of 12 000 tickets.
Thus, the £10 variable cost relates only
to a sales volume within a range of
4000 - 12 000 tickets.
          Margin of safety

The margin of safety indicates by how much
sales may decrease before a loss occurs.

percentage margin of safety
= (expected sales – break-even sales)
÷ expected sales
= (£160 000 - £120 000) ÷£160 000
= 25%
A Limited has fixed costs of
£60000 per annum. It
manufactures a single product
which it sells for £20 per unit.
Its contribution to sales ratio is
40%. A Limited’s breakeven
point in unit is      .
Z plc makes a single product
which it sells for £16 per unit.
Fixed costs are £76 800 per month
and the product has a
contribution to sales ratio of 40%.
In a period when actual sales were
£224 000, Z plc’s margin of safety,
in units, was       .
The following monthly data are
 available for the Boarder, Inc. and its
 only product: Unit sales price = $36,
 Unit variable expenses = $28, Total
 fixed expenses = $50,000. Actual sales
 for the month of May = 7,000 units.
 The margin of safety for the company
 for May was:        .
Keller Co. sells a single product for
$28 per unit. If variable costs are
65% of sales and fixed costs total
$9,800, the break-even point will be
(rounded):         .
The contribution margin ratio is 30%
 for the Spice Co. and the breakeven
 point in sales is $150,000. If the
 company desires a target net income
 of $60,000, sales would have to be:
 .

								
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