Cost Volume Profit Analysis of SEGi Education Group


The first education centre established in 1977 in the heart of Kuala Lumpur known as Systematic Education Group by offered professional qualifications such as LCCI, ACCA and ABE. Today, the college succeed attained University College status and there are 6 campuses and 5 training centres around Malaysia by offering an extensive range of courses in 13 fields of studies to an estimated of more than 18,500 students.


SEGi aspire to be the leading educational institution with global emphasis.


To empower learners with educational and training excellence relevant to industry needs in contributing positively to global communities.

In line with the group's vision and mission to be the premier education and training provider for all levels of society, the group is committed to offering students a wide variety of nationally and internationally recognized qualification courses taught by first-class lecturers to give the overseas learning environment.

SEGi also emphasis on the importance of basic theoretical knowledge and expose to corporate as well as on the job training, in order to produce graduates who passes prestigious academic qualification, skills competency, confidence and holistic characters.

Strengths and Weaknesses of SEGi

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As the competition in today's education sector increase rapidly, in order to sustain among the colleges and university, the internal analysis by compared with others competitor could identified what is the strengths and what is the weaknesses existed in SEGi should be improved.


Provide education opportunities by offering affordable fees and varies types of scholarships to financially needy students to pursue higher education in SEGi.

Partnerships with reputable global university such as UK, USA, Australia and India by offering more than 100 programmes and courses from pre-university/diploma to doctorate level.

Fame with 30 years of excellent quality education has become the hallmark of private higher education provider in Malaysia.

All campuses are deliberately and strategically located in key city centres in order to capture significant target markets in Peninsula and East Malaysia.


Broken facilities and technology such as lack of learning halls, activities places, accommodation and poor education equipment provided in SEGi.

Unsystematic and inefficiency management of SEGi affect the impression of students on SEGi's performance.

Facing the problems of inexperience lecturers and always lack with full time lecturers and staffs.

Pay attention on academic only but ignore the importance of sports and general knowledge in our life.

Cost-Volume-Profit (CVP) Analysis

In this coursework, cost-volume-profit analysis (financial model) selected to assist in make a right choice and avoid costly mistake in SEGi's decision-making. There are two different views of CVP model, which the total cost and total revenue functions are curvilinear in economist's model whereas accountant's model assumes linear relationships (Appendix A).

Economist's approach is looking at the longer term by consider company's total costs and total revenues but Accountant's approach is only intended to provide an approximation of revenue and cost behaviour over the relevant range in the short term (The non-hub story, 2007).

Purposes of CVP Analysis

The objective of CVP analysis is to establish what will happen to the financial results if a specified level of activity or volume fluctuates (Drury Colin, 2003). It is helpful to evaluates the effects of forecast changes in sales, variable cost and fixed costs. The analysis normally used in making decisions concerning pricing of products, choice of product lines, and utilisation of production facilities. (The non-hub story, 2003)

Through the CVP analysis, SEGi would be able to identify the levels of operating activity needed to avoid losses, achieve targeted profits, plan future operations, and monitor organizational performance. (The non-hub story, 2004)

Breakeven Analysis

To plan for the future for SEGi, it is important to know whether the current operation is profitable as a whole. The breakeven chart plotted in Appendix D has shown the relationship between total courses fees, total number of students, total variable costs and total fixed costs occurs in SEGi is either loss or profit within the relevant range. The term relevant range referred to the output range at which the firm expects to be operating within a short-term planning horizon (Colin)

From the breakeven chart, break-even analysis predicts the 8744 number of students required, at a given course fee of RM 36,800 per students, required to recover the total costs. In other words, it is the breakeven point that is the dividing line between operating at a loss and operating at a profit. Where the number of students is below 8744 students, loss will be incurred whereas there will be a profit if exceeds of more than 8744 students. SEGi might be face risks if increase the fixed cost/courses fee, because the breakeven point is almost over the output range and the profits may become less and less. Planning to operate only just above the number of student necessary in order to break even may indicate that it is a risky venture, since only a small fall from the plan could lead to lose.

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The usefulness of being able to deduce the BEP is that it makes it possible to compare the planned or expected volume of activity with the BEP and so make a judgement about risk (Atrill.P & McLaney.E 2008). Therefore, varies changes can be applied on the different total courses fee, variable costs, fixed costs and margin of safety to show the possible interrelationship.

In order to obtain a lower breakeven point and higher profit, it is suggested to lower the fixed costs but increase the variable costs of SEGi. If it is possible to reduce variable costs, then the contribution per unit will be increase. SEGi will reach the breakeven point at a lower number of students and will then earning profits at a faster rate. Furthermore, the total courses fee would cover the total costs faster if the total fixed costs decrease and less than 8744 number of students required reaching the profits.

Compared with Appendix D and F, appendix F gives a lower breakeven point below the relevant range, higher profits and greater margin of safety whereas the actual figures from SEGi (Appendix D) show a high breakeven point and small margin of safety.

Margin of Safety

The margin of safety is the difference in units between the budgeted sales volume and the breakeven sales volume and it is sometimes expresses as a percentage of the budgeted sales volume (ACCA Study Text 2001). It is a rough measure of the risk that SEGi might make a loss if it fails to achieve its budget.

By compare the percentage margin of safety (Appendix E), most people would prefer the assumed figures, since the margin of safety between the expected numbers of student and breakeven is much greater. Thus, for the same level of return the risk will be lower by decrease the fixed costs but increase the variable costs.


Referred to the Appendix G, at the breakeven point, the contribution equals fixed costs exactly. At levels of output above the breakeven point, the contribution is larger, and not only covers fixed costs, but also leaves a profit. Below the breakeven point, the loss is the amount by which contribution fails to cover fixed cost.

The advantage of this form of presentation is that the total contribution is emphasized in the graph, and is represented by the difference between the total sales revenue line and the total variable cost line (TR-TC line). It contributes to meet the fixed costs and, if there is any excess, it also contributes to profit.

Profit Volume Chart

To ascertain the profit or loss figures from a breakeven chart, it is necessary to determine the difference between the total-cost and total courses fee lines. The profit-volume graph is a more convenient method of showing the impact of changes in volume on profit. From the graph (Appendix I), it show clearly the effect on profit and breakeven point of any changes in total courses fee, variable cost, fixed cost and number of students. As the number of student increases, the amount of the loss gradually decreases until BEP is reached. Beyond BEP, profits increases as the number of student increases.

Targeted Profit

CVP analysis is also used to determine what level of sales is necessary to reach a targeted level of profit. To achieve the profit, total courses fee gained must cover all costs and leave the required profit. According the Appendix J, SEGi have to attract 14,744 numbers of students in order to meet a RM 75,000,000 profits. Therefore, SEGi could plan for future strategy by compare the number of student, courses fee and targeted profits to reach the targeted goals.

Assumptions of CVP analysis

The Courses fee per student, Variable costs per student and total fixed costs are considered constant.

CVP analysis applies only to a short-term horizon.

All costs can be accurately split into fixed and variable costs and only affected because the changes of number of student

The courses fee does not change as the changes of volume of student

Weaknesses of CVP Analysis

CVP provide lots of useful formula and usage, however, have its weaknesses. For Example, SEGi provide more than one education and the different courses provide different fixed costs, selling price and variable costs. There is a problem to identifying the fixed of one particular as the fixed costs tend to relate to more than one courses.

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The fixed costs assumed remains constant in CVP analysis are incorrect because most fixed costs are not fixed over all number of students. They tend to be stepped in different period because of further expansion occurred. The problem is particularly heighted because most activities will probable in various type of fixed costs, all of which likely to have steps at different point.

The normal approach to breakeven analysis assumes that the relationships between sales revenue, variable costs, and volume are strictly straight-line ones. In real life this is unlikely to be so because at high levels of output economies of scale may be available to an extent not available at lower levels.


From the CVP analysis above, it is suggested to make some changes on courses fee, fixed cost and variable costs to improve the efficiency and operation of SEGi. By lower the fixed costs such as the


Undoubtedly, CVP analysis is particularly well suited to management needs in short term decision making, future planning, pricing decision and earned targeted profits. It makes use of graphs and chart to analyse the effect of the changes of total costs, total courses fee and profits occurred in SEGi by include all the courses fee, variable costs and fixed cost. The breakeven chart, contribution chart and profit volume graph extremely helpful in presenting management accounting information and easier understood by non-financial managers who are involved in making decisions which have financial consequences.

Assumptions List

All of the figures used in this coursework are merely assumptions.

In this coursework, the figures have been round up to the nearest thousand.

The currency of Ringgit Malaysia (RM) is used.