COLLEGE OF BUSINESS
BKAL 3063 INTEGRATED CASE STUDY
FIRST SEMESTER 2013/2014 (A131)
Pn. NORAZA BT MAT UDIN
CASE 6: GEZ Petrol Station: Using CVP Analysis for Planning
EXPIRE: 24 November 2013 (Before 10 a.m.)
GROUP A (7)
MARISA BT MUSRIL
GOH ING MIN
ELIZABETH ESTONIA ANAK JONIC
NURLIYANA BT ZAINUL ABIDIN
WONG ZI XIN
Mr Aiman is the GEZ Bhd’s area manager who is responsible to directing sales activities for more than twenty petrol stations in the northern region of Malaysia. The petrol station business is very stable and consistent due to the continuous increase of the regions vehicles. But the petrol station operators often facing problem to sustain the business and lead to dealership license. After investigation, Mr Aiman discover failure to sustain the petrol station business was due to lack of finance and costing knowledge among the dealer and related staff. Besides, he also believed ability for the dealer and related staff to differentiate fixed and variable expenses, prepare financial statement, and CVP analysis can help them to survive. So Mr Aiman seek assistant from Rizal, a trained management accountant to develop financial model that can help dealer perform CVP analysis.
GEZ develop and operate petrol station under three basic concepts, namely Company Owned Station (COS), Partially Company Owned Station (PCOS), and Dealer Built Station (DBS). Under COS and PCOS, the operator was the landowner and under the operator was not the landowner for DBS. The petrol conducts mainly two business, which is fuel business and convenience store business, SelesaMart. Besides that, GEZ affiliate with more than 40 reputable business partners. Some of the affiliations partners included A&W, AmBank, American International Group (AIG), Bank Rakyat, BSN, Burger King, CIMB, Delifrance, Dunkin’ Donuts, Giant, KFC, Maybank, McDonald’s, OCBC, and RHB. Furthermore, Automated Teller Machine (ATM) and Touch ‘n Go reloads counter we installed at some of GEZ’s service stations.
2.0 Analysis and Discussions
2.1 How lucrative is the petrol station business??
Based from the calculation in Appendix 1, the petrol station business was able to produce total sales as much as RM20,682,189.60. Where fuel business was able to contribute as much as 60% (RM19,251,897.60) to total sales for the petrol station. On the other hand, the convenience store business was producing 40% to the total sales of the petrol station sales with RM1,430,292.00.
After deducting direct cost (RM19,283,712.20), credit card fee(RM82,728.76), and royalty (RM1,034,109.48) for both of the business, a remaining of RM281,639.16 was the contribution margin for the whole petrol station business. Besides that, Appendix 1 also show the contribution margin for each of the business, where the petrol business was 0.38% and SelesaMart was 14.6%. Finally, after deducting all of the fixed cost like salary (RM25,568.00), electricity, water, telephone (RM75,000.00), equipment rental (RM7,380.00), insurance premium (RM1,920.00), and stationary (RM112,268.00), the net profit for the petrol station business is RM169,371.16.
2.2 Since the margin on fuel business is very low (6%) compared to convenience store (20%), do you agree that the convenience store is subsidizing the fuel business?
Based on the calculation in Appendix 1, although the Petrol business contribution margin ratio (0.38%) is far more lesser than SelesaMart (14.60%), but the fuel business still enjoy contribution margin as much as RM72,816.53. But after take into account the total fixed cost allocated to the fuel business, the fuel business suffer loss of -RM6,875.79. The fuel business suffer for loss as mainly due to the loss suffer by RON 97(-RM837.09) and diesel business (-RM88,512.54). Whereas SelesaMart enjoy profit of RM176,245.34. So we can...
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