GEZ Bhd is the main oil organization in Malaysia has done two primary businesses, which is the gas business and the convenience shop business. Beneath the fuel business, the gasoline stations sold Petrol Ron 95 (R95), Petrol Ron 97 (R97), and Diesel-powered. Mr Aiman was as an Area Director is responsible for directing the sales activities greater than twenty gasoline stations inside the northern place of Malaysia. They are possessing a difficulty to sustain in the industry even though they are really in the secure business segment and steady in the long run.

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The main reason for this is the lack of expertise in financial and being which is it contributed to the company failure. There was disadvantages linked to a petrol station that is the energy business a new very low profit margin. It was important that providers manage all their cash collection very well. Realising the importance of management accounting concepts, Mister Aiman presumed that the traders and their relevant staff should have the knowledge in cost accounting.

In order to accumulate data and make financial unit, Mr Aiman has sought the guidance from Rizal, a trained management accountant. To begin with developing a CVP model, Rizal has collected the necessary data from Grande Service Place (BSS) which can be the busiest petrol station in the town. The petrol station got four sends for gas and a single for diesel and the amount of nozzle was 20. The version that he’d develop could be applied by simply petrol stop operators of the identical category. Regarding this case, from your cost-volume-profit examination, Rizal will get that the breakeven point which can be how much sales the gas station of the type ought to generate from each of the gasoline products and the Selesamart. Mister. Aiman could also learn which the importance of identify between set cost and variable price so that the gas stations can easily sustain all their profitable business and progress.


1 . How profitable is the gasoline station organization?

To determine how lucrative is this business, we have to identified every

aspect with detailed calculation of the income declaration which is really does include all the revenue attained, fixed cost and adjustable cost that related to the both form of the business. First of all, we instructed to understand the meaning of each aspect. Fixed costs are understood to be expenses that remain basically unchanged regardless of the output level or sales revenue, inside the relevant period. By explanation, there are no fixed costs in the long run, because the long run can be described as sufficient period of time for all short-run fixed advices to become varying. Variable costs are thought as expenses that vary depending on the output level or revenue revenue of any company inside the relevant period. Generally, being a business’s output increases, changing costs could also increase. The more products a business markets, the more money it consumes on supplies and manpower to produce individuals products. All of us categorized all of the expenses in fixed and variable costs and compute the net revenue of Baron Service Train station for season 2009.





While describe in the Calculation explained above, the entire contribution margin of Baron Service Stop consists of two parts, which are fuel business and SelesaMart business. Total contribution perimeter is RM1, 166, 341. 94. Contribution margin of SelesaMart business is about the less twenty percent of the total contribution perimeter, which means that SelesaMart business has been doing well, additionally , profit of SelesaMart will probably be higher if this doesn’t need to pay a five per cent royalty to GEZ. From the income assertion we can interpreted that this business in profitable enough with a control of expenditures and Expense related to the operation, in which BSS can generate Nett Profit of RM 772, 825. 94 (Calculation according to as Connection 1)

installment payments on your Since the perimeter on gasoline business is extremely low (6%) compared to convenience store (20%), do you acknowledge that the ease store is definitely subsidizing the fuel organization?

Firstly, the profit margin for fuel organization is very low if when compared with convenience store. The fuel business just gets regarding 6% of profit margin for season 2010.

Profit = Sales ” cost

= fully ” 94%

= 6%

This is because GEZ Petrol just gain some portion of benefit from the product sales of each litre of Ron 95, Ron 97 and Diesel. Under is the income for each litre of energy sold simply by GEZ Gasoline Station as well as the profit margin for each form of fuel. Products

Price per litre

Cost per litre

Profit every litre

Profit margin (%)

Ron 95

RM1. 80

RM1. 6856

RM0. 1144

6. 36

Ron 97

RM2. 05

RM1. 9356

RM0. 1144

your five. 58


RM1. 70

RM1. 7388

RM0. 0612

a few. 40

Besides that, the petrol place also are not able to increase the cost even though the federal government increase the price of fuel. In the growing process, the perimeter per litre would stay the same. For instance , if the government announced there

might be a 40 cents increase in the cost per litre, then, workers also have to pay out 40 cents higher. So , the profit margin will not maximize.


Cost per litre

Expense per litre

Earnings per litre

Profit margin (%)

Ron 95

RM2. 20

RM2. 0856

RM0. 1144

your five. 20

Ron 97

RM2. 45

RM2. 3356

RM0. 1144

4. 67


RM2. 20

RM2. 1388

RM0. 0612

2 . 79

From the above computation, it shows that the profit margin will not maximize due to increase in price. Although the profit perimeter for fuel business is lower than income margin pertaining to convenience retail store, but the earnings gain via fuel organization is much better than comfort store. For example , from the month to month average product sales of RM 1 . several million; where large portion of this sum is originate from fuel business (RM 1 . 6 , 000, 000 from the revenue), while only RM 0. 1 million comes from ease store. In addition , in 12 months 2009, the sales income of the gasoline station is RM twenty, 682, 189. 60 and about RM nineteen, 251, 897, 60 from the amount comes from fuel business; which is roughly 93. 08% (RM 19, 251, 897, 60/ RM 20, 682, 189. 60) of the revenue. While, just 6. 92% (RM one particular, 430, 292/ RM20, 682, 189. 60) comes from grocery stores. So , with this situation, it show which the fuel business itself can sustain the business enterprise of gas station even without convenience shop because the ease store only contributed just a little portion of all their income.

Other than that, most of the buyers who come to gas station should be refuel rather than shop on the convenience retail store. Only a few customers will buy at all their convenience shop because in the event that someone wants to buy foods or various other daily needs, they will prefer supermarket because they have more alternatives compare to comfort store. Therefore , large portion of revenues or income that flow into the company is definitely from the sales of Ron 95, Ron 97 and Diesel. Although the profit margin for fuel business is small but the revenue can be far better compared to convenience stores. Consequently , the convenience retail outlet is not really subsidising the fuel organization instead both equally fuel organization and ease store experienced contributed to sustainability of GEZ Petrol Place.

3. In the event the government raised the RON95 price to RM2. 12, do you predict the profitability from the business will probably be eroded?

In the event the government raised the Ron 95 price to RM 2 . you per litre, the profitability of business will probably be affected drastically. The changes of RON95 cost from RM1. 80 to RM2. 10 per litre has gradual price of RM zero. 3 per litre. In parallel, price per litre of Ron 95 will also increase RM 0. 2788 from RM 1 . 6856 to RM 1 . 9644 per litre due to appraisal of cost on price proportion of 93. 64%. Total Net profit for RM 1 ) 8 (Ron 95) can be RM 766, 706. 02 and had increase to RM 924, 046. 16 once Ron 95 price increased to RM 2 . 1 ) Net revenue margin acquired increase by 3. 71% to 3. 98%. For Break- even Analysis, the increase of Ron95 price has indicate a better end result which only required 3187559. 208 litres/ RM 6, 936, 231. 66 compared to 3618188. 562 litres/ RM 7, 015, 784. thirty four to achieve zero profit. In overall, surge of Ron95 price by simply government can benefit GEZ petro station’s financial efficiency. It has higher profitability and capable to accomplish Break Even Level with a reduced output level compared to past price which in turn RM 1 ) 8 per litre pertaining to Ron 96. Below are all of the changes of GEZ financial overall performance if Ron95 price improved.

RON95 (79%)

**Assuming the portion of fixed cost among Fuel business and Selesa Mart is founded on the average sales of 2009 Price every litre

RM1. eighty

Total Fixed Cost (RON95)

Portion between fuel organization and Selesa


RM195, 720. 02

= 1 ) 6/1. six =94. 12%

Utility Expense

RM35, 550. 00

94. 12% of sum in set cost pertaining to fuel business


RM5, 487. 35

5. 88% of sum in fixed cost pertaining to Selesa Mart

Insurance Premium

RM1, 427. 61


RM1, 784. 52

Total Set Cost

RM239, 969. 53

RON 95

Fixed Cost -Salaries



Total each year


Fixed cost- Incomes

Train station Manager




zero. 9412*0. 79

28605. 78


one particular



zero. 79

15869. 52


a few



0. 79






0. 79

92373. 12





0. 9412*0. 79

8565. 67

General Worker




0. 9412*0. seventy nine

14365. 35

Security Guard


one thousand


zero. 9412*0. 79

8922. 58


195720. 02

Input altered: (Exhibit 3)

Original Cost

New Price

4. If the credit card sale is reduced from forty percent to twenty percent, what is the result on total profitability?

Currently more and more people are applying credit card inside their daily life. People prefer bank cards because they are convenient to use and it is much easier to take them instead of carrying a lot of cash. And if pocket or handbag is thieved, we can merely call the creditor and close the credit cardaccount before any individual uses the card. In GEZ petrol station, petrol employees had to encounter was the increasing cost of visa or mastercard fees paid to traditional bank as more and more of their customers had been starting employing credits greeting cards. When a drivers pays for gas with a mastercard, GEZ gasoline station need to pay a typical 1% from the sales cost to the traditional bank to process the payments.

GEZ gas station have accounted which the credit card revenue are almost 40% with their00 sales. Analysis are made to the Baron Support Stations ( BSS), a petrol station that was found in a city, in the northern area of Malaysia. It was one of the busiest gasoline stations inside the city. In year 2009, BSS made sales income of RM 19, 251, 897. sixty, 40% of the revenue RM 7, 700, 759. 04 was result from credit card sales and the financial institution will charge RM 77007. 59 from the mastercard sales. All those fees are so high, it already slender profit margins to make it hard to get stations to generate money about gas product sales. Otherwise if the credit card revenue is reduce to 20% of the earnings RM 3, 850, 379. 52 was come from credit-based card sales plus the bank will charge RM three or more, 850, 3. 80 from your credit card sales. For details as listed below:

Credit Card Costs (40%)


Sales (Litres)


Total Earnings

Ron 95

8, 459, 604. 00

1 . 80

15, 227, 287. 20

Ron 97

174, 576. 00

2 . 05

357, 880. 70


2, 037, 072. 00

1 . 70

three or more, 666, 729. 60

19, 251, 897. 60

Usage of Visa or mastercard


several, 700, 759. 04

Credit Card Costs Charges


Credit-based card Fees

seventy seven, 007. fifty nine

Credit Card Costs (20%)


Revenue (Litres)


Total Revenues

Ron 95

8, 459, 604. 00

1 . 80

15, 227, 287. twenty

Ron 97

174, 576. 00

2 . 05

357, 880. 70

Diesel powered

a couple of, 037, 072. 00

1 . 85

several, 666, 729. 60

19, 251, 897. 60

Usage of Mastercard


three or more, 850, 379. 52

Credit Card Service fees Charges


Credit-based card Fees

32, 503. 70

Baron Service Station

Partial of Cash flow Statement intended for Year Finished 2009 (20%)

Energy Business

Selesa Mart


19, 251, 897. sixty


you, 430, 292. 00

(-) Adjustable Cost

Raw Material Expense

18, 139, 478. 60

Evaporation Losses

83, 613. 27


1, a hundred and forty four, 233. sixty

Credit-based card Fees

38, 503. 80


71, 514. 60

Contribution Perimeter

990, 301. 93

Contribution Margin

214, 543. 80

Total Contribution Margin

1, 204, 845. 73

(-) Fixed Expense

393, 516. 00

Nett Revenue

811, 329. 73

Based upon the computation above, when the credit card sales been altered from 40% to 20% it will impact the overall profitability of the firm. The cash flow statement demonstrated the increase of net benefit from RM 772, 825. 94 to RM 811, 329. 73 of RM 38, 503. 79. When the mastercard sales reduce, a 1% fees was charged by banks will also reduce and this effect the variable expense for the business from prior to change cost is RM 18, 300, 099. 46 to after modify cost of RM 18, 261, 595. 67. The difference between both of the charge and firm managed to save is RM 38, 503. 79.

The increasing with the amount in using mastercard to make payment in thepetrol station may also increase the expense of credit card charges that need to pay to banks, indirectly it will offer effect towards the profitability of the station. The profit of the place will lower due to the elevating of expense. If elevating of customers decides to make repayment by funds instead of credit-based card, then the earnings of the gas station is going to increases, since the extra cost for the credit card revenue that they endure will be lessen. To cover the condition, petrol areas can change the cost of credit-based card charge by simply charges again the customer when they use playing cards. However gas stations need to take risk that they maybe is going to losing client. Customer could be will plan to change to different petrol areas that do not have any charge if they use visa or mastercard to make payment. Petrol stop also can offer a cash-only low cost. This may entice more client make payment by using funds.

5. What is the appropriate basis to designate the cashier cost between four products Ron ninety five, Ron ninety-seven, diesel and SelesaMart?

To assign the expense of products, we all use price allocation as it is a tool that may helps manager to track the cost that connected more efficient. Costs are allocated to obtain ideal motivation as it sometimes built to influence managing behaviour and thus promote target congruence and managerial efforts. Instead, it is used to compute income and asset values and to warrant costs or perhaps obtain compensation because sometimes prices are based directly on costs, or perhaps it may be essential to justify an accepted bid. From your information given in the case, GEZ petrol station conducted two main business which is the fuel business and the convenience store business, known as SelesaMart. Since GEZ provide joint provide, hence the appropriate basis is revenue value at split-off stage. The desk shown listed below is the synopsis of monthly average product sales.




Fuel Business

94. 12%

RM 1, 600, 500

Gas Ron ninety five


RM 1, 264, 000

Petrol Ron 97


RM thirty-two, 000



RM 304, 000


5. 88%

RM 100, 1000



RM 1, seven hundred, 000

Table 5. 1 Monthly average revenue in 2009

The total month to month average product sales given can be RM 1, 700, 500 with RM 1, six-hundred, 000 was generated from your fuel business and the staying from SelesaMart which in RM100, 000. The highest contribution in fuel business in Petrol Ron ninety five with RM 1, 264, 000 and follow with Diesel which is RM 304, 000 after that Petrol Ron 97 with RM thirty-two, 000. After that, we need to calculate total earnings for R95, R97, Diesel and Selesamart. Thus all of us multiply sales per litre with cost per litre to get the quantity of earnings. As stated in case the revenue revenue that BSS generated is RM20, 682, 189. 60 which have been comprise RM19, 251, 897. 60 of fuel revenue and RM1, 430, 292 of SelesaMart sales.

The calculation can be summarizes since the table shown under:





Sales (Litres)

eight, 459, 604

174, 576

2, 037, 072

Price per litre (RM)

1 ) 80

2 . 05

1 . 80


RM15, 227, 287. 20

RM357, 880. 85

RM3, 666, 729. 60

RM1, 430, 292. 00

Percentage (%)

73. 63%

1 ) 73%

17. 73%

six. 92%

Table five. 2 Total revenue and percentage

To get BSS, they will allocate even more cost to Petrol Ron 95 because it contribute the very best revenue which can be RM 12-15, 277, 287. 20 continue with Diesel with RM 3, 666, 729. 62. For Gas Ron ninety-seven and SalesaMart, BSS may allocate less cost as it contributed only RM357, 880. 80 and RM1, 430, 292. In BSS there was two certified working on the sales counter-top. One is going to concentrate on the fuel ventures, and one particular for the shop, even though they deal with both ventures at times and overall there was 6 certified working for BSS. Monthly income per person for the cashier is RM950. So BSS shall pay out RM5, 700 to their six cashiers and RM68, 500 in annually. The appropriate basis to set aside the cashier cost between your four products RON95, RON97, diesel and SelesaMart is usually we determined the revenue for the four companies we divided with the total sales to obtain the percentage for every single products. Therefore the percentage to get product RON95 is 73. 63%, RON97 is 1 . 73%, diesel-powered is 18. 73% and SelesaMart with 6. 92%.

The total income for Petrol Ron 95, Petrol Ron 97, Diesel-powered and SelesaMart is RM20, 682, 189. 60. Following we find the percentage, we computed the cashiercost for each item. To find the cashier cost, we multiple the percentage with the total annual salary for the cashier which is RM 68, 400(RM 950 x 6 x 12). The result is, to get the product RON95 the cashier cost is RM50, 359. fifty eight followed by RON97 is RM1, 183. 49, diesel can be RM12, 126. 58 and SelesaMart can be RM4, 730. 25. The total cashier expense is RM68, 500. The measurements can be sum it up as shown in stand below:





Percentage (%)

73. 63%

1 ) 73%

17. 73%

six. 92%

Cashier Expense

RM50, 359. 54.99

RM1, 183. fifty eight

RM12, 126. 49

RM4, 730. 25

Stand 5. 3 Percentage and cashier price

The choice of way of allocating common costs depends on the ease of app, the identified quality details reported to external parties, and the identified fairness with the allocation when multiple merchandise managers are in charge of for joint products. Yet , as discussed above, the allocation of common costs is arbitrary, and no method is conceptually considerably better any other method. All ways of allocating prevalent costs throughout joint goods are generally worthless for functional, marketing, and product charges decisions.

six. Is energy cost set or changing? What difference does it generate to the breakeven point of Ron 95 if it is labeled as i) fixed expense, and ii) variable price? In our thoughts and opinions utility cost is fixed cost. This is because, the cost will probably be relatively the same as it was used for all the time. This kind of cost will not effect the unit sold although it not utilized.

Utility expense as FC

Energy cost as VC


five, 024, 702. 71

4, 154, 075. 59


2, 791, 501. 50

a couple of, 307, 819. 77

If the utility is fixed cost, the Make your money back Point in RM is larger compare to the utility expense as varying cost. Same goes to the Break Even Justification in Unit, which can be the utility as fixed cost is higher compare to the utility because variable cost.


Relating to this case, in the cost-volume-profit research, Rizal will find that the breakeven point which is how much sales the gasoline station of the type ought to generate via each of the gasoline products and the Selesamart. Mr. Aiman could also learn which the importance of distinguish between set cost and variable price so that the petrol stations can easily sustain their very own profitable organization and growth. If the utility is fixed cost, the Break Even Reason for RM is higher out-do the electricity cost since variable expense which is RM5, 024, 702. 71 when compared to RM4, 154, 075. fifty nine. Same visits the Break Even Point in Unit, which is the utility because fixed cost is higher, a couple of, 791, 501. 50 beat the electricity as adjustable cost two, 307, 819. 77 To assign the cost of products, we all use price allocation since it is a tool which could helps supervisor to track the charge that associated more efficient.

Costs are invested in obtain preferred motivation because it sometimes built to influence supervision behaviour and therefore promote target congruence and managerial work. Instead, it is used to compute cash flow and property valuations and also to justify costs or get hold of reimbursement because sometimes rates are structured directly on costs, or it may be necessary to justify an accepted wager. From the data given in the case, GEZ gas station carried out two key business which is the energy business as well as the convenience shop business, known as SelesaMart. Seeing that GEZ offer joint offer, thus the correct basis is definitely sales benefit at split-off point


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