Application of Cost-Volume-Profit Analysis in Decision-Making by Public Universities in Vietnam

Oanh Thi Tu LE, Phong Thi Thu TRAN, Thuan Van TRAN, Cong Van NGUYEN /
Journal of Asian Finance, Economics and Business Vol 7 No 6 (2020) 305 – 316 305
Print ISSN: 2288-4637 / Online ISSN 2288-4645

doi:10.13106/jafeb.2020.vol7.no6.305
Application of Cost-Volume-Profit Analysis in Decision-Making by

Public Universities in Vietnam
Oanh Thi TuLE1, Phong Thi Thu TRAN2, Thuan Van TRAN3, Cong Van NGUYEN4
Received: March 30, 2020 Revised: April 11, 2020 Accepted: May 01, 2020
Abstract
This paper aims to examine the application of cost-volume-profit (CVP) analysis by public universities in Vietnam. In the context where
Vietnam is gradually transferring financial autonomy to public universities, the conduct of a CVP analysis in relation to these public
universities is particularly urgent. Research samples were collected in 2018 and 2019 by surveying Vietnamese public universities. After
collection, the data is synthesized by excel file, conformity check, data cleansing and data analysis on SPSS software by tools such as
Frequency statistics, price statistics, and means. The results show that: (1) universities used the CVP analysis in decision-making, (2)
information related to the CVP analysis used for decision-making by administrators remained simplistic and lacked cost-control details,
and (3) the application of the CVP analysis by university administrators for decision-making was neither comprehensive nor coordinated.
The findings also show that, given the current conditions in Vietnam, increasing the governance in public universities is essential, as is
contributing to reducing costs, increasing universities’ income, providing the best service to students, and improving the quality of training.
The study calls for the flexible application of the CVP analysis, which will provide information to help managers at Vietnamese public
universities make the best decisions.
Keywords : CVP Analysis, Decision Making, Public Universities, Vietnam.
JEL Classification Code: M10, M21, M41
1. Introduction (Government, 2015). Facing integration requirements and

the application of autonomy, Vietnamese public universities
Vietnamese public universities operate primarily on needed to make continuous efforts to improve the quality of
the mechanism of state budget allocations. This leads to training, prestige and competitiveness (Le, 2017). In order to
the passive way in management activities and financial enhance control of costs, revenues and profits, and promoting
management in particular (Tran, 2016). To overcome these the quality of training, the leadership of Vietnam’s public
limitations, the Government of Vietnam has handed over universities is forced to pay attention to decision-making,
autonomy to public universities, by the Prime Minister’s including information derived from Cost-Volume-Profit
Decree No. 16/2015/ND-CP on February 14, 2015 (CVP) analysis. The actual survey results show that the
financial information at the Vietnamese public universities
was limited to some basic data such as: (i) Expense
1
First Author. University of Labour and Social Affairs, Hanoi, Vietnam. elements such as salaries, scholarships, outside services,
Email: oanhletu@gmail.com etc. (according to the State budget index), there was lack
2
Hanoi Open University, Vietnam. Email: thuphonghou@gmail.com
3
Associate Professor, The National Economics University, Vietnam. of variable costs and fixed costs data, which was the basis
Email: tranthuan19@ymail.com for making decisions with each increasing options or costs
4
Corresponding Author. Professor, The National Economics controlling to each department; (ii) Information on budgeting
University, Vietnam [Postal Address: 207 Giai Phong Road, that complied with the norms, regimes and standards of the
Dong Tam Ward, Hai Ba Trung District, Hanoi, 113068, Vietnam]
Email: anhcongtuan@gmail.com State; (iii) Information on management decentralization was
not yet associated with the responsibility for cost control of
© Copyright: The Author(s)
This is an Open Access article distributed under the terms of the Creative Commons Attribution departments; (iv) Information on costs, break-even points,
Non-Commercial License (http://Creativecommons.org/licenses/by-nc/4.0/) which permits
unrestricted noncommercial use, distribution, and reproduction in any medium, provided the
training costs for a student was not synchronized, based on
original work is properly cited. the personal experience of the administrators. Therefore, the
306 Journal of Asian Finance, Economics and Business Vol 7 No 6 (2020) 305 – 316
decisions of the leaders were focused on the short term and the relevant output volume: total cost, unit price, unit cost
not associated with more modern management methods such variable, and unit margin. Using the information from a CVP
as responsibility accounting in order to assign expenditures analysis, managers will find the relationship between cost
and revenues to each department; it would produce balanced (C), output volume (V) and profit (P). The CVP analysis is
scorecard to promote the power of the system synchronously, an effective way to forecast costs, realize target profits, and
towards achieving the universities goals in the long term. analyze a company’s decisions. Until now, the CVP analysis
Limited information provision in Vietnamese public has been more widely used in business than in education.
universities has reduced their effectiveness.
The CVP analysis is a technique whereby each change 2.1. Studies on CVP Analysis in Business
in cost, volume, and price will comes across with profit
(Kaplan & Atkinson, 2007). Over time, the CVP analysis Researching the use of the CVP analysis in decision-
has become increasingly popular and generated useful making, Buşan and Dina (2009) showed the CVP relationship
information, related to control production output, plan and as the way of developing total revenue, total cost and
make decisions such as types of products, their volume, operating profit. The volume of production, unit prices, unit
expanding or narrowing a product line, break-even point variable cost, or fixed cost help managers answer various
of output, revenue and time, and consumption to achieve questions such as: How will income and costs be affected if
the target profit (Bauer & Bauer, 2018). According to the volume sold out is unchanged? What will happen if unit
Gean and Gean (2015), the CVP analysis is an important prices increase or decrease? Whether to expand business in
method to capture the reaction and the relationship between foreign markets?
activities, costs, volumes and profits, providing a wealth Fixed costs in hotels tend to be high, so when the revenue
of relevant information useful for decisions in short term. drops significantly below break-even, the losses will be high.
The CVP analysis is aimed at determining the output that Therefore, the traditional cost-volume-profit analysis model
adds value to the business, emphasizes the impact of fixed is widely used in the hotel industry to determine break-even
costs, break-even points, target profits that determine sales point. Phillips (1994) looked at the basic cost-volume-profit
volume and revenue estimates. Making price decisions and analysis model and described how to include uncertainties
price structures is simpler when using the CVP analysis. In in the decision-making process. It has therefore been shown
addition, the CVP analysis provides users with information to determine probabilities for different expected levels of
about the safety margin of a fall in sales that can be maintained return, and also to consider some other inherent operational
before sales reach break-even, and imminent losses if sales difficulties of the basic cost-volume-profit analysis model.
fall in the next stage. As regards the multidisciplinary company analysis
The CVP analysis, applied to universities like businesses, based on a micro approach, Kim (2015) developed a
includes determining fixed costs, variable costs, break- micro approach to find break-even points and target profit.
even points for each course; number of required students in This study attempted to develop a systematic approach to
each course; continued training, narrow or stop for classes, refine the answers of two basic issues in the CVP analysis:
courses, or majors; how many training courses are needed break-even point and target profit. Jiang and Shen (2017)
for the school to meet its profit goals, etc. The application conducted an analysis of the restaurant’s cost, break-even,
of the CVP analysis model analyzes the cost of the number safe operation level, and the impact of restaurant profit due
of students and the income, determine the minimum number to changes switch factor. This result helped the restaurant
of students trained to break even, balance the budget and manager make better decisions by analyzing multi-element
determine enrollment targets for the next year, etc., is positioning in the service industry and examining the
essential. Therefore, this study considers and evaluates: (i) relationship between the key elements of the service industry
the situation of cost classification for the CVP analysis in and the profit due to factor change.
Vietnamese public universities, (ii) the reality of using CVP Punniyamoorthy (2017) stated that the CVP analysis
analytical information to make decisions in Vietnamese was a tool to assess the impact of changes in value, volume,
public universities, (iii) the request information on the CVP variable costs or fixed costs on benefits. Moreover, CVP
analysis from university leaders to make a decision, and (iv) was the basis for pricing, deciding short-term options, target
the suggestions for applying the CVP analysis to decision- costs and value of the exchange.
making in Vietnamese public universities. Lulaj and Etem Iseni (2018) argued that the CVP analysis
was an important content to plan and make decisions in
2. Literature Review business. The research was carried out in manufacturing
and service businesses, using a combination of econometric
The CVP analysis is conducted based on a series of models to make this research accurate and effective. The
basic assumptions about the relevant parameters that limit results showed that the amount of produced products had
a positive impact on the sales for service companies and teaching activities. The result showed that large, non-profit
increased profits for the manufacturing business, there was teaching hospitals in urban areas had higher fixed costs and
an important relationship between production and sales. lower variable costs, lower revenue and return on assets
Stoenoiu (2018) conducted a study on the sensitivity of the (ROA). In contrast, non-profit rural hospitals tended to have
indicators used in the CVP analysis. The research was based lower fixed costs, higher variable costs, higher revenues and
on the need to optimize and manage costs due to unforeseen higher ROA.
economic events in all areas. Therefore, this study analyzed Some authors are interested in the aspect of applying
the dependency relationship among the three CVP indices to CVP analysis in the education sector and the public sector
highlight the need for permanent monitoring and optimization such as Goddard (2006), Cropper and Cook (2000). These
of these variables to provide a reliable basis for management studies use survey methodology to evaluated the application
decisions. The research showed the extent and significance of the CVP analysis to the accounting work of universities
of the changes toward one or more variables due to the direct and showed the benefits of applying this technology to
relationship and inversion between these variables. universities. However, studies indicated that the challenge
Referring to the CVP analysis, Enyi (2019) compared of using a cost-based operating system is complex and
the effect of the weighted contribution margin (WCM) expensive, so the benefits should be weighed against the
and the reversed contribution margin ratio (RCMR). The cost. Goddard (2006), when investigated the relationship
result showed that WCM lacked analytical efficiency and between accounting and new public management (NPM)
generates suboptimal products mix because it ignored the at the UK Local Government tried to consider management
inverse relationship between a product’s contribution margin from the perspective of participants and pointed out the
ratio (CMR) and its break-even point (BEP). The paper accounting knowledge and NPM related to governance
suggested the use of the RCMR with the effects of the CMR/ and local government responsibilities. Cropper and
BEP measurement. Cook (2000) described the current state of cost in higher
education, reviewed recently-published documents and
2.2. Studies on CVP Analysis in the Education analyzed organizations’ progress in implementing a CVP
Sector and the Public Sector analysis. The study results found that the implementation
of the CVP analysis is slow and, therefore, it is necessary
The research by Witte and López-Torres (2015) was based to increase the pressure of change from donor agencies and
on the previous study with inputs, outputs and contextual central government. At the same time, research results have
variables, as well as the data sources used in the articles shown that many universities are not happy with their cost
to conduct the research in the education. The study clearly accounting system and are looking to change them. With
showed the difference in effectiveness between education the financial resources available to universities becoming
and economics. Regarding quantitative research, Upping and increasingly limited, it is necessary to offset the costs from
Oliver (2012) conducted the survey with 78 financial directors the revenues of the courses to better manage the source.
of public universities in Thailand to assess factors affecting The balanced scorecard is an effective management
the change of accounting information for planning and control tool. Philbin (2011) points out that developing and applying
purposes. The research showed the basic factor affecting the a balanced scorecard with financial and non-financial
information conversion process was the low efficiency due measures can improve governance efficiency of governance
to the lack of technology resources and the staff had only in universities. From there, it will bring intangible benefits
practical knowledge about private enterprises. The study also to stakeholders such as students, faculty, the state and the
emphasizes the role of the information system – including whole society. Research has identified ways to develop
CVP analysis – in supporting the operational environment balanced scorecard-based reports that include economic and
under government budget reduction and strengthening non-economic measures to improve university management
financial responsibility in public universities. performance by providing tangible benefits for stakeholders.
Agasisti and Johnes (2010) studied the heterogeneity and To identify barriers for university and industry cooperation,
the effectiveness evaluation in Italian universities resulting and develop recommendations for the internal ecosystem
from the rapid change of the higher education environment of technology commercialization, Alibekova, Tleppayev,
in Europe since the mid-1980s when the Italian government Medeni, and Ruzanov (2019) conducted a survey of experts.
transfers financial autonomy to universities. The study had Survey results showed that the main barriers for cooperation
useful information on changes in cost structure and technical between universities and the industry are: lack of resources
efficiency that lead to a decline in profitability in typical to build university-industry links, lack of time due to high
universities. Liu, Forgione, and Younis (2012) compared teaching load, poor qualification of technology transfer
the CVP structure of large urban hospitals with non-profit managers, and incomplete connection with the industry.
teaching activities and small-profit hospitals without rural Based on the results of expert surveys, the study proposes an
ecosystem development to commercialize university-based There were 55 valid answers from 53 public universities.
technologies, in which the following economic activities are Due to the low response rate (40%), the sample size of the
important: human resources, finance and intellectual property study was calculated using the following formula (Nguyen
management system and intermediary infrastructure. & Nguyen, 2015):
The study by Abdullahi, Bello, Mukhtar, and Musa
(2017) on the use of the CVP analysis as a management ntt = n*re
tool for decision-making in small businesses of Bayero
University, Kano, was conducted on the main database In which:
that collected by structured questionnaires. The hypotheses n is the required sample size
were tested by the Mann-Whitney U-test and the Pearson ntt is the minimum sample size in practice
correlation coefficient. The study concluded that small
re is the response rate (%)
businesses were less interested in using the CVP analysis
and other management accounting tools. Since then, the According to this formula, the actual sample size required
study also recommended the use of the CVP analysis in small for the study is:
businesses in general and small businesses in universities in
particular to improve productivity. ntt = 102*(55/138) = 41.
In the study of factors affecting the industry and
university cooperation in education in the hotel industry The number of samples collected in this study was
in Vietnam, Nguyen & Nguyen (2020) considered that the 55, which is appropriate for analysis. A total of 55 people
process factor has the most positive factor, followed by the participated in this study, of which people who have more
contextual factor. The study also revealed that the benefit than 10 years of work experience accounts for 27%; 49.1%
factors were significantly associated with educational of respondents have from 5 to 10 years of work experience
cooperation, affecting university and industry hotel allianecs. (20; 36.4%). Furthermore, 76.4% of respondents have
Le (2017) considered management accounting as a tool for a postgraduate degree, the remaining have a university
financial autonomy at public universities, in which, the degree. The results of the demographic survey show
author proposed classification of variable costs and fixed that respondents are suitable subjects to collect relevant
costs; identify the object of cost collection by training level information on the management accounting application of
and training system; assess the cost fluctuation impact on public universities.
the financial performance of the school. The mention of the Regarding the surveyed universities, among 53
CVP analysis for short-term decision-making is unclear. universities, 16 are fully autonomous, 29 are partially
Some other indirect studies related to finance in public autonomous and eight are not autonomous. In terms of age,
universities. Zulfaris, Mustafa, Mahussin, Alam, and Daud 25 universities have operated over 50 years (accounting
(2020) when studying the relationship between student for 47.2%), 16 universities have operated from 20 to 50
and money management behavior showed that all financial years (accounting for 30.2%), only a small number of
knowledge and socializing of the parents have a positive universities have operated for less than 20 years. Regarding
relationship with money management; meanwhile, peer location, the majority of universities are located in the
influence and self-control have a negative relationship North (30; 56.6%), the number of universities located in the
with money management. The study also asserts that Central and South are relatively similar (20.8% and 22.6%
most students admit they cannot control themselves in respectively). Compared to the overall distribution level
managing their money and that their parents are playing of 138 Universities (Vu, 2017), universities located in the
an essential role in securing their money management. North accounts for 54%; universities located in the Central
Sabri, Cook and Gudmunson (2012) when studied about and the South are 20% and 27% respectively. Thus, the
the financial well-being of Malaysian college students that distribution of the sample of 53 universities is appropriate
show the experiences of childhood consumers such as the (see Table 1).
habit of saving contribute to helping students earn a lot of The collected data is processed on SPSS 20 software
money (saving money, current financial situation, financial combined with analyzing and comparing the results with
management skills) and a level of financial literacy related statistical secondary data to achieve the research objectives.
to financial well-being. Steps of the research are as follows: (i) entering data into
excel file, checking the validity of answers, eliminating
3. Research Methodology blank and incomplete answers; (ii) checking and cleaning
The study was conducted by sending questionnaires to the data; (iii) analyzing data on SPSS 20 software with the
finance departments of 138 public universities in Vietnam. following tools: Frequency statistics and mean.
Table 1: Characteristics of Vietnamese public universities
Number of universities Percentage

The criteria
(units) (%)
None autonomy 8 15.1
Partial autonomy 29 54.7
1. The degree of autonomy
Full autonomy 16 30.2
Grand Total 53 100.0
< 10 years 3 5.7
10 - 20 years 9 17.0
2. Age of University 20- 50 years 16 30.2
<50 years 25 47.2
North 30 56.6
Central 11 20.8
3. Location
South 12 22.6
4. Research Results “No” response is between 49.1% and 72.7%). In particular,

reporting of controllable and uncontrollable costs receives
4.1. Regarding Operating Expenses the least attention, and the rate of non-implementation is
72.7%. Thus, reports providing useful information to the
Cost is an important part of a university’s CVP analysis. board of administrators in decision-making are not made
It is assessed on three dimensions: cost classification, cost regularly by public universities.
reporting and cost allocation. Through a reasonable cost General cost allocation is always a concern for
classification, accountants can provide multi-dimensional accountants when providing appropriate cost information
information. Through detailed reports on variable costs and for cost-bearing subjects. The more specific the general cost
fixed costs; controllable costs and uncontrollable costs; cost allocation, the more appropriate the information provided
factors; direct and indirect costs universities, administrators for the management’s decision-making. The actual survey
will have an appropriate cost assessment and apply it in the shows that the general cost allocation is prepared flexibly
CVP analysis. by universities, and each type of cost has its own allocation;
In terms of cost classification and tracking of operating for example, the cost of investment in teaching materials
costs, universities only track cost factors such as salaries, can be allocated by the number of faculty members of the
scholarships, outside services, etc. (according to the State department, and training management expenditures are
budget index), with 100% of answers being “Yes”. Other allocated according to the number of students managed by
classifications include variable costs and fixed costs; direct that department. This flexible allocation is popularly applied
and indirect costs for one student; direct and indirect costs for by approximately 76.4% of universities. Moreover, the cost
each department; and controllable and uncontrollable costs allocation according to the number of students of the entire
which are not emphasized by universities. The percentage university accounts for 40%. Not many universities allocate
of universities that do not classify or track these costs is costs according to the number of students of the courses or
between 43.6% and 63.6%. These are necessary costs in the number of staff at the departments; the response rate of
management reports, but not yet implemented. “No” of these particular survey items were approximately
In terms of cost reporting to administrators, the finance 67.3% and 81.8%, respectively.
departments of universities only report the cost factors Thus, the cost classification and cost reporting for
while other types of costs such as variable costs and fixed university administrators’ decision-making are conducted by
costs; direct and indirect costs for one student; direct and accountants; however, those reports are neither
indirect costs for each department; and controllable and comprehensive nor coordinated. The reports remain
uncontrollable costs are not presented (the percentage of simplistic and mainly track costs factors, while other
information for cost control
such as controllable and uncontrollable costs and direct and when making decisions. More detailed information for
indirect costs for each department are not prepared or receive decision making is shown in Table 3.
the attention of accountants (see Table 2). In terms of frequency, most respondents agreed that the
finance departments of universities provide information for
4.2. Information for Decision-Making the board of administrators’ decision-making; the percentage
of “agree” and “totally agree” were over 60%. It was found
When asked about the use of the CVP analysis when that 81.8% of respondents used the information to decide the
making decision to choose one of many options, 55/55 wage of teachers and that about 78.2% used the information
university administrators said they consulted the accountants’ for making decisions about joint training courses. It was also
information. This shows that the board of administrators found that 76.4% used the information for determining tuition
attributes great importance to the accounting information fees for short-term training classes. Furthermore, there was
Table 2: Cost Classification, Reporting and Allocation in the Public Universities Vietnam
Actual application (units)

The criteria
Yes No Grand Total
1. Classification Controlled and uncontrolled cost 20 35 55
Cost factor (salary, scholarship, outside
55 0 55
services, ...)
Direct and indirect costs (per department,
31 24 55
department, department, ...)
Cost per each student 29 26 55
Fixed and variable costs 29 26 55
2. Report Controlled and uncontrolled cost 15 40 55
Cost factor (salary, scholarship, outside
55 0 55
services, ...)
Direct and indirect costs (per department,
28 27 55
department, department, ...)
Cost per each student 26 29 55
Fixed and variable costs 19 36 55
3. Allocation criteria Specific criteria for each type of cost 42 13 55
The number of officers in each department 18 37 55
The number of students each course 10 45 55
The number of students in university 22 33 55
Table 3: CVP analytical information for decision making
Percentage (%)
Make decision N Mean
S1 S2 S3 S4 S5 S4 & S5
1. Breakeven point for each course 55 3.62 3.6 3.6 29.1 54.5 9.1 63.6
2. Determine repeat class size 55 3.71 1.8 9.1 21.8 50.9 16.4 67.3
3. Calculate the unit cost for 1 student 55 3.73 1.8 7.3 21.8 54.5 14.5 69.0
4. Identify joint training courses 55 3.93 0.0 5.5 16.4 58.2 20.0 78.2
5. Calculate the cost of short-term
55 3.82 3.6 3.6 16.4 60.0 16.4 76.4
training courses
6. Set unit price of lecture hours 55 4.04 0.0 1.8 16.4 58.2 23.6 81.8
Notes: S1 (Strong Disagree) and S5 (Strong Agree)
only a small percentage of respondents who disagreed with 4.3. Requirements for the Application of CVP
using information for decision making (from 0% to 3.6%). Analysis in Making-Decisions
For more details, see the comparison that is made in Figure l:
Regarding mean values, all information serving In order to evaluate the requirements for the application
university administrators’ decision-making has high mean of the CVP analysis in public universities in Vietnam, this
values from 3.62 to 4.04. Information used to make the paper evaluates the opinions of the financial department
decision on the unit price for lecture hours has the highest on the necessity of the following contents: (i) preparing
mean value of 4.04, and it is followed by the mean value for cost reports and (ii) providing information for decision-
using information for making the decision on joint training making. The results from Table 4 show that the finance
(mean value of 3.93) and the mean value for using the department said that it is necessary to prepare cost reports
information to determine tuition fees of short-term courses for decision-making (with mean values of 3.45 to 4.05), in
(3.82). The information that is not used much is the break- which making cost reports based on the cost factors had the
even point for each course (mean value of 3.62). highest agreement, followed by making reports based on
Therefore, in terms of information used for decision- the cost for one student and for each department (unit and
making, according to accountants of public universities, the faculty), with mean values of 3.96 and 3.85 respectively.
accounting and finance department provides basic information Regarding frequency (see Figure 1), three types of reports
serving as a basis for the board of administrators; specifically, that have the highest level of the agreement are reported by
the department provides information for deciding the wages departments and students, by variable and fixed costs, and
of teachers, joint training courses, and sizes of repeat classes. by factors (from 47% to 53%). Reporting by factors and by
Accounting information is a reliable and effective basis for departments had the response of “strongly agree” with rates
administrators when making decisions related to the opening of 29% and 27% respectively. The reporting by controllable
of short-term training courses, joint training, repeat classes and uncontrollable costs had the lowest rate of agreement,
(the scale and break-even points thereof), cost per student, and and the response rate for “disagree” was about 13%. The
the wage of teachers. necessity of providing information on CVP analysis for
Figure 1: Compare CVP analysis information by frequency and average value
Table 4: Requirements on cost reporting
Percentage (%)
Report N Mean
S1 S2 S3 S4 S5 S4 & S5
By variable costs and fixed costs 55 3.75 0.0 7.30 27.30 49.10 16.40 65.50
By direct and indirect costs (per student) 55 3.96 0.0 5.50 20.00 47.30 27.30 74.60
By direct and indirect costs (per department) 55 3.85 0.0 10.90 12.70 56.40 20.00 76.40
By factors (salary, scholarship, outside services 55 4.05 1.80 1.80 14.50 52.70 29.10 81.80
By controllable and uncontrollable cost 55 3.45 0.0 12.70 36.40 43.60 7.30 50.90
administrators’ decision-making is shown in Figure 2 and the most (with a mean value of 4.04), and the remaining
Table 5. information such as break-even point and analysis of changes
In terms of mean values (Table 5), respondents agreed in costs, volume, and profit had similar mean values (3.91
on the information provided for administrators’ decision- and 3.95). In terms of frequency, all information had a high
making, with mean values ranging from 3.91 to 4.04. The level of “agree” and “strongly agree”, with rates from 69.1%
information to achieve the targeted profit was appreciated to 80% (see Figure 3).
Table 5: Requirements for decision making
Percentage (%)
Making decision N Mean
S1 S2 S3 S4 S5 S4 & S5
Breakeven point information 55 3.91 0.0 1.8 29.1 45.5 23.6 69.1
Information to achieve the target profit 55 4.04 0.0 1.8 18.2 54.5 25.5 80.0
Analysis of changes in costs, volumes and
55 3.95 0.0 0.0 27.3 50.9 21.8 72.7
profits

Figure 2: Cost reporting requirements by frequency and average value

Figure 3: Decision-making information requirements by frequency and average
5. Discussion and Recommendations nor coordinated. The finance department of universities

only tracks cost factors such as salaries, scholarships,
5.1. Discussion outside services, etc. (according to the state budget index).
Along with the cost classification, 100% of universities pay
The survey on the CVP analysis in public universities great attention to the cost reporting by factor. The types of
in Vietnam shows that universities used information from costs needed for management reports, such as variable and
this analysis in making decisions: cost classification and fixed costs; direct and indirect costs for one student or for
determining break-even point, the number of students, and departments; and controllable and uncontrollable costs are
determining the wage of teachers. The research results are not provided regularly. Totally autonomous universities
explained as follows: make these reports at the lowest level (from 24% to 40%)
compared to the other two groups. These reports, which
Regarding cost recognition. provide useful information for administrators in making
The finance department of universities tracked cost factors decisions, are not prepared regularly in public universities.
separately, such as expenses for teachers (salaries, bonuses, Information on variable costs and fixed costs serves as a
allowances, etc.), expenses for students (scholarships, basis for decision making with additional options; direct
cultural activities, and sports), administrative expenses, and indirect costs for each student serve as a basis for
expenses for teaching, scientific research, procurement, and determining break-even points of training courses, training
the repair of assets. The distribution of general expenses to majors, and joint programs; direct and indirect costs for
provide appropriate cost information to subjects bearing costs each department serve as a basis for decision making and
are made based on flexible criteria; accordingly, each type of cost control for each department, faculty, discipline, and
cost has a reasonable allocation. From tracking these types campus.
of expenses, the finance department prepares cost reports In addition, general cost allocation is always a
to provide useful information about the amount and rate of complicated issue for management accounting. Universities
each type of cost in total costs. In particular, controllable and classify costs based on flexible criteria. Classification
uncontrollable costs, which are essential in cost control, are of costs based on the number of students of the entire
monitored better by totally autonomous universities than university accounts for 40%. However, classification of
other groups of universities, which account for 90% of the costs based on the number of students enrolled in courses;
studied universities of this paper. the classification of costs based on the number of staff
working in departments is not used much (from 67.3% to
Regarding information from the CVP analysis for 81.8%). In summary, the cost classification and making
decision-making. cost reporting for administrators’ decision-making are
According to the survey results, the finance departments neither comprehensive nor coordinated. The reports only
provide basic information for administrators, such as wages track costs factors while other information for cost control
of teachers, joint training, sizes of repeat classes, and training such as controllable and uncontrollable costs and direct
costs for each student. Information such as break-even points and indirect costs for each department is not provided nor
of joint programs and repeat classes are also provided by the addressed by accountants.
finance department to the administrators to make appropriate
decisions. This is relevant information for administrators Regarding information from CVP analysis for decision
in making decisions. When comparing the degrees of making.
autonomy of the studied universities, all universities are Universities do not track costs separately for long-
concerned and use CVP information. Specifically, totally term and short-term training activities under contracts with
autonomous universities are more likely to provide and campuses and short-term classes nor for each discipline.
use such information. This proves that the CVP analysis is Therefore, it is difficult to control costs, and there are certain
more useful to administrators when universities are more limitations in the provision of information to administrators
autonomous. to make decisions in signing contracts, opening training
Apart from certain achievements, the CVP analysis of classes, and determining the number of students of each
universities still has limitations. This information tends to discipline to achieve optimal efficiency. Information related
mostly feature financial accounting information, reducing the to decision making of short-term training courses, joint
role of providing information to administrators; specifically: training courses, repeat classes (the size and break-even
points thereof), cost per student, and wage of teachers are
Regarding cost classification of cost reporting. not prepared regularly; in particular, information which is not
The cost classification and cost reporting for used often is the break-even point for each course (with the
administrators’ decision-making are neither comprehensive mean value of 3.62).
5.2. Recommendations Classification of direct and indirect costs for each

student
5.2.1. Regarding Cost Classification and Cost Reporting The costs for each student include all lecturers’ salaries,
expenses directly and indirectly related to teaching. In
Costs of activities in universities of universities can which, the direct costs are costs directly related to the
be divided into types of costs providing management number of students such as: Wages for lecturers’ lessons,
accounting information such as dividing costs into which are determined based on the assignment of the
variable costs, and fixed costs which is the initial basis faculty and the corresponding confirmation of lecturers;
to implement the application of management accounting. depreciation expenses of items such as offices, computer
Variable costs are understood as the total costs that in terms rooms, classrooms are determined by table of allocation
of value vary according to the level of activities (salaries and depreciation rates; scholarships are determined based
paid to lecturers, support for students). Fixed costs are on the list provided by the student affairs department and
costs which do not change in terms of value within certain the specified scholarship amount, and other expenses such
capacity such as the depreciation of lecture halls, salaries as teaching equipment, drinking water are determined by on
paid to administrators. After classifying costs, accountants the specified amount established by the universities. Indirect
can provide information about break-even points for each costs are costs related to many students, which need to be
class, course, and discipline. Therefore, the paper proposes allocated such as: salaries of staff, managers, which are
the classification of costs of universities as follows: determined by payroll standards; depreciation of offices are
determined based on the allocation and depreciation rates;
Classification of fixed and variable costs other expenses are determined based on actual usage. With
Fixed costs include depreciation of lecture halls, this classification, the university can collect information and
depreciation costs of machinery and equipment (facilities, evaluate the results of each class, program, and course.
cars, teaching equipment), expenses for basic salaries,
expenses for hiring security guards and sanitation costs 5.2.2. The Application of CVP Analysis in Making
which fixed periodically. Variable costs include services Short-Term Decisions
purchased from outside electricity, water, lecture halls);
wages paid to lecturers; overtime wages paid to lecturers. The Currently, universities should examine activities from
fixed cost is characterized by the lecture hall used for various many perspectives to find the optimal training system.
time slots that should use the straight-line depreciation rate; For universities, the cost-volume-profit model can help
then, the depreciation expense for lecture halls, machinery, to determine the minimum number of courses required to
and cars will be fixed under certain conditions. This means offset the costs. This is a useful tool that can help university
that, when the income reaches the break-even point, the administrators to select relevant information in making
additional income will only need to offset the variable costs, decisions. It is not only helpful in designing training programs
and the university will start to have profits. Therefore, in the and implementing new strategies, but it also helps universities
annual estimation plan, it is necessary to take into account to consider possible risks. The application of the information
the diversity of tuition revenues of the system by year, in making short-term decisions can be explained as follows:
calculating the break-even point. If the break-even income Determining break-even points for each class, course,
is exceeded, the additional income after subtracting variable and discipline: the universities should determine details
expenses should increase with respect to interest. about numbers of students to reach the break-even point and
Fixed and variable costs should be tracked separately required fees to meet break-even points. Then, university
by department, course, discipline, and joint program. The administrators can make decisions about whether to keep
more detailed the level of cost reporting, the more helpful certain classes or not. The number of students and required
the information will be to calculate the results, such as fees to meet break-even points are necessary to set targets
calculating interest for each joint program, course, and for each class, course, and discipline and financial targets
discipline. The accounting department of the schools can of the university. The determination of break-even points
track details receivables for each year, each program, and is important to IT and language centers, which provide
from scientific research. After subtracting the corresponding certificates of competence for students to meet the graduation
variable costs for each subject (class, course, discipline, requirements of the university. Furthermore, universities
etc.) and separate fixed costs (if any), the result will be have certain centers that help their directors to determine the
the corresponding interest of each subject as a basis for minimum number of students required for each class. The
efficiency evaluation of the estimation or implementation. application of cost-volume-profit analysis helps universities
to establish indicators such as the contribution margin Goddard, A. (2006). Accounting and NPM in UK local government
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Oanh Thi Tu LE, Phong Thi Thu TRAN, Thuan Van TRAN, Cong Van NGUYEN /

Print ISSN: 2288-4637 / Online ISSN 2288-4645

Application of Cost-Volume-Profit Analysis in Decision-Making by

Keywords : CVP Analysis, Decision Making, Public Universities, Vietnam.

JEL Classification Code: M10, M21, M41

1. Introduction (Government, 2015). Facing integration requirements and

Table 1: Characteristics of Vietnamese public universities

Number of universities Percentage

4. Research Results “No” response is between 49.1% and 72.7%). In particular,

Actual application (units)

Table 3: CVP analytical information for decision making

Figure 1: Compare CVP analysis information by frequency and average value

Table 4: Requirements on cost reporting

Notes: S1 (Strong Disagree) and S5 (Strong Agree)

Notes: S1 (Strong Disagree) and S5 (Strong Agree)

5. Discussion and Recommendations nor coordinated. The finance department of universities

5.2. Recommendations Classification of direct and indirect costs for each

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