GRADUATE SCHOOL OF BUSINESS (UKM – GSB)
ZCMA6022 MANAGERIAL ACCOUNTING
CASE 1: CAPPUCINO EXPRESS
Adapted from: Morse, Davis & Hartgraves (2003), Management Accounting: A strategic Approach,
pp. 36-37.
Three years ago, Vincent Chow completed his college degree. The economy was in a depressed state at the
time, and Vincent managed to get an offer of only $20,000 per year as a bookkeeper. In addition to its
relatively low pay, this job had limited advancement potential.
Since Vincent was enterprising and ambitious young man, he started a business of his own. He was
convinced that because of changing lifestyles, a drive-through coffee establishment would be profitable. He
was able to obtain backing from his parents to open such as establishment close to the industrial park area in
town. Vincent named his business The Cappuccino Express and decided to sell only two types of coffee:
Cappuccino and decaffeinated.
As Vincent had expected, The Cappuccino Express was very well received. Within three years, Vincent had
added another outlet north of won. He left the day-to-day management of the each site to the manager and
turned his attention toward overseeing the entire enterprise. He also hired an assistant to do the record
keeping and other selected chores.
Required:
1.
2.
3.
4.
5.
Develop an organization chart for The Cappuccino Express.
What factors can be expected to have a major impact on the success of The Cappuccino Express?
What major tasks must Vincent undertake in managing the The Cappuccino Express?
What are major costs of operating The Cappuccino Express?
Vincent would like monitor the performance of each site manager, what measure (s) of performance
should he use?
6. If you suggested more than one measure, which of these should Vincent selected if he could use only
one?
7. Suppose the last year, the original site had yielded total revenues of $146,000, total costs of
$120,000, and hence, a profit of $26,000. Vincent had judged this profit performance to be
satisfactory. For the coming year, Vincent expects that due to factors such as increased name
recognition and demographic changes, the total revenue will increase by 20 percent to $175,200.
What amount of profit should he expect from the site? Discuss the issue involved in developing an
estimate of profit.