Research on the design and application of mathematically driven cost-volume-profit analysis tools in logistics enterprises

Vărzaru, A.A. et al. pointed out that companies using more innovative management accounting tools have better performance and can manage sustainability more effectively through surveys [1]. Broccardo L, Mauro S.G. emphasize the participation of internal stakeholders, use management accounting tools to promote communication, explore opportunities for sustainable development, and point out key factors in the implementation process [2]. Through quantitative analysis techniques, Afifa M.A et al. use quantitative analysis techniques to reveal that technical factors and market competition have indirect effects on management performance through the medium of management accounting system [3]. Qin Xiaomei pointed out that PSI ( production, sales and inventory ) management is responsible for quantity planning in SCM ( supply chain management ), and accurate forecasting planning can improve manufacturing profitability [4].

Rentsen et al.pointed out that companies often use cost-volume-profit analysis to analyze the sales, prices and costs required for specific profits. They propose a multi-product break-even and profitability analysis based on sphere packing and linear programming to provide management with recommendations for selecting the best CVP parameters [5]. Al-dhubaibi A.A.S. believes that the user’s acceptance of the activity-based costing information system as a management accounting tool is enhanced by expanding the scope of use and the revenue report realized by the system users (departments) as a medium [6]. Sivashankari C.K et al.considered the break-even point and profit maximization, determined the optimal pricing and optimal batch of products, and used sensitivity analysis for numerical verification [7]. Aljasim L et al.explored the sensitivity analysis of the optimal solution of the multi-choice knapsack problem in the case of profit fluctuation of any project [8].

Taking logistics enterprises as an example, Xiaoyan Wang pointed out that after the implementation of the operation chain cost method, enterprises significantly reduced logistics costs and significantly increased revenue [9]. Zhao G proposed a logistics cost strategy based on factor weights in the context of Industry 4.0, accurately calculating weights and total costs, and making management more scientific and reasonable [10]. Zhu S et al.studied the logistics service cases of shipping enterprises, and constructed the evaluation index system and its hierarchical structure of shipping logistics service capability [11]. Wanqing Shao pointed out that global economic integration has promoted the development of logistics industry, and logistics has become an independent and important professional field. The port needs to optimize the information cost investment strategy based on the current situation [12]. Jia F et al. discussed the key technologies of cloud platform construction through the case of China‘s container export, provided support for the informatization of railway and waterway intermodal transportation [13].

To sum up, the innovative use of management accounting tools can improve company performance and sustainability. Cost-volume-profit analysis methods such as CVP and ABC are widely used in enterprise decision-making. The exploration of logistics enterprises in operation chain cost method, logistics cost management and information cost investment strategy provides a new path for optimizing cost structure and improving profitability, which lays a foundation for this study. However, there are few studies on the sensitivity of sales price, variable cost, fixed cost and pre-tax income of shipping logistics enterprises through cost-volume-profit tools and models, which need to be explored continuously.

Management accounting divides costs according to cost behavior, variable costs change linearly with business volume, and fixed costs are constant within the relevant range. The total cost is the sum of the two. Identifying cost behavior is the basis of break-even, contribution margin and sensitivity analysis.

The cost of logistics enterprises is complex and diverse, covering all aspects of the entire logistics activities, including transportation costs, storage costs, handling costs, packaging costs, management costs, depreciation costs, inventory holding costs, capital costs and so on. The cost of a marine transportation group mainly comes from the container shipping business, including equipment and cargo transportation costs, voyage costs, ship costs, and other costs. The cost of equipment and cargo transportation accounts for about 50 % of the company’s total cost, including fixed costs such as depreciation and rent of containers, maintenance fees, and variable costs such as storage fees and loading and unloading fees at port terminals, which change with the increase and decrease of cargo volume. The voyage cost accounts for about 25 % of the company’s total cost, mainly including fuel costs, as well as ship-related wharf and canal costs. This part is the variable cost, which varies with the distance of navigation and the volume of transportation. The ship cost accounts for about 20 % of the total cost, mainly including the depreciation and leasing cost of the ship, which is the fixed cost. Other costs account for about 5 % of the total cost, including land logistics cost, information and network input, management personnel cost, etc. The cost behavior of these costs will vary according to the statistical caliber. In order to facilitate the analysis and statistics, this paper classifies the self-cost as fixed cost. According to the cost behavior, the total cost formula is as follows:

The total cost is TC, the total fixed cost is TFC, the total variable cost is TVC, the unit variable cost is VCU, and the business volume is Q. In a marine transportation group, the division of various cost items is shown in Table 1.

The business volume under the critical point of profit and loss can only make up for the cost of the enterprise. Only when the enterprise exceeds the guaranteed amount can it have operating income, which is called the safety margin at this time. The safety margin indicates how much profit space there is after the business volume of the enterprise is guaranteed, or how much loss will occur when the existing business volume is reduced. Only the safety margin can form the profit or loss of the enterprise, that is:

In the formula, Q is the normal business volume, BEQ is the business volume at the break-even point, CMU is the unit marginal contribution, and EBIT is the earnings before interest and tax. As shown in Figure 1, the right side of the break-even point is the profit area, and the business volume exceeding the break-even point is called the safety margin, and the corresponding income is the safety margin. In the dynamic cost-volume-profit analysis chart, the safety margin changes with the change of the critical point of profit and loss, and the operating income also increases and decreases.

The target pre-tax income of the enterprise is the target operating income, which can be the self-determined profit target of the enterprise, or it can be a relatively extreme situation, such as achieving capital preservation or controlling the loss margin. The cost-volume-profit analysis needs to combine the business income planning of the enterprise to analyze the business volume level that the enterprise needs to achieve the target operating income. According to the formula for calculating the pre-tax income of interest rate, the business volume to achieve the guaranteed target profit is : 6 Q=TFC+EBITCMU \[Q=\frac{TFC+EBIT}{CMU}\]

Among them, Q is the target business volume to achieve operating income, TFC is the total fixed cost, EBIT is the earnings before interest and tax ( operating income ), and CMU is the unit marginal contribution. Using the cost-volume-profit analysis model created above, we can achieve the change requirements of various factors affecting operating income in order to achieve a certain level of operating income, and only need to call EXCEL’s univariate solution tool to carry out the hypothesis analysis of the result change. For example, in the single variable solving tool, the target cell is operating income, the target value is 3 million yuan, and the variable cell is business volume. As shown in Image 4 below, 31.1633 million TEU can be obtained, indicating that in order to achieve 3 million yuan operating income, the business volume should reach 31.1633 million TEU. Similarly, the variable cells in the univariate solving tool can be replaced by unit variable cost, fixed cost or unit price respectively, and the operating income of 3 million yuan can be achieved. The unit variable cost is 28.9743 million yuan, or the fixed cost is 33366.2205 million yuan, or the unit price is 73.2786 million yuan. Through the cost-volume-profit model, it is helpful for enterprise managers to predict the operating income more intuitively and conveniently.

Figure 4.

Analysis of the result change hypothesis of achieving the target operating income

From the sensitivity analysis, it can be seen that the impact of various factors on operating income is different and has priority. The change of unit price has the greatest impact on the target operating income of the enterprise, that is, the target operating income has a low tolerance to unit price change. On the premise of in-depth analysis of the market situation, fully understanding the pricing strategy of competitors and the relationship between market supply and demand, the enterprise formulates a competitive dynamic pricing strategy. When the capacity is tight, it can appropriately increase the price and provide high value-added services, such as priority shipping, increasing express delivery, etc. A small increase in price can lead to a significant increase in operating income ; at the same time, if the price is lowered, it will also cause a sharp decline in operating income, so the price reduction should be cautious. For ocean shipping companies, they should always pay attention to market risks and potential cost changes, such as fuel price fluctuations, exchange rate changes, etc., and should also fully assess risk factors when setting prices.

Rationally plan routes, reduce unnecessary sailing distance and waiting time, analyze the profitability of each route, adjust the route network, reduce fuel consumption and port costs, and concentrate resources on the most favorable routes. At the same time, the variable cost is finely managed, including fuel cost, port cost, loading and unloading cost, etc., to improve the operation efficiency of the ship and reduce the vacancy rate, and reduce the transportation cost per container. For fixed costs, through consultation to reduce rent and storage costs, improve the fixed asset management system, regular maintenance and maintenance of fixed assets, extend the service life, improve the efficiency of the use of assets. Conduct regular variable cost and fixed cost audits to continuously seek opportunities to reduce costs. By understanding the composition and change trend of cost, an efficient information management system is adopted to improve information transparency and real-time performance, and provide information support for the formulation of cost control strategies.

Through the cost-volume-profit analysis model, it can be seen that only when the business volume of the enterprise exceeds the critical point of profit and loss will the operating income be formed. The purpose of the enterprise’s operation is to pursue greater profits. Profit is brought by the safety margin, which measures the risk tolerance of the enterprise in the face of market fluctuations or other uncertain factors. The higher the safety margin rate, the greater the profit space created by the enterprise, and the safer the enterprise’s operation. In terms of continuing to increase business volume, enterprises improve business operation efficiency, accurately predict market demand, formulate more targeted business strategies, identify new trade growth points, develop inland transportation and multimodal transport services, and open up potential new routes through market research and digital technologies such as big data, artificial intelligence, and cloud computing. Optimize the frequency of berthing ports and shifts, improve service levels, establish customer loyalty files, and attract long-term customers. Strengthen cooperation and alliance, cooperate with port logistics enterprises, share resources, promote environmental protection technology and green shipping services, do a good job in brand publicity, improve visibility and goodwill. All strategies continue to adjust and optimize according to market conditions and corporate strategies, increase business volume, expand the safety margin, and enhance the stability and safety of business operations.

To sum up, the application of cost-volume-profit analysis method and model in marine transportation logistics enterprises can help enterprise managers improve the effectiveness of decision-making in predicting operating income and achieving target operating income. Through sensitivity analysis, it further reveals the impact of key factors such as business volume, unit price, unit variable cost and fixed cost on the critical point of profit and loss, and provides a scientific basis for enterprises to adjust their business strategies. In addition, the research also emphasizes the application value of the univariate solving tool in the model when setting the target operating income, so that enterprises can more intuitively understand the specific business volume and other related conditions required to achieve the expected operating income. It can be seen that the design and application of the cost-volume-profit model is a valuable tool in the management of logistics enterprises, which can improve the management efficiency, reduce the management risk and provide effective information support for decision makers.