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Sap For Atlam Essay

1951 words - 8 pages

CASE 6 : SAP FOR ATLAM
BACKGROUND OF THE COMPANY
Company Name : Akademi Teknikal Laut Malaysia (ATLAM)
Principal Activities : Education & Training
Commenced Operation : 15th August 1981
Number of Employees :Approximately 200 employees
Office : Melaka & Terengganu
Main Problem : Asked to upgrade its accounting system with the PETRA group-wide SAP system which takes up a very high initial investment compared to ACCPA
Introduction on SAP
SAP is an Enterprise Resources Planning (ERP) and stands for Systems, Applications and Products in data processing. It is a system that handles almost all departments in an organization. SAP has several modules as illustrated below.

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However, implementing the SAP may reduce cost in technical expertise and process and procedures. Other than that, it will also save the accountant’s time and improves efficiency which implicates costing as well.

B. After-tax Cash Flow
Using the estimated cost that is provided by the PETRA’s group-wide SAP system, we have constructed a table to predict the after-cash flows. First, the total savings and cost for the first year to the 6th year is calculated. After that, depreciation cost at 34% out of the initial investment (RM 4,344,390) using the straight-line method is determined. This is done to reduce the tax rate which stands at 25%. After deducting the tax from earnings, reversal of depreciation is done for income statement.

Year | 1 | 2 | 3 | 4 | 5 | 6 |
Accountant's time and efficiency |   | 400,000 | 800,000 | 1,200,000 | 1,600,000 | 2,000,000 |
Technical expertise cost savings | 600,000 | 1,200,000 | 1,400,000 | 1,600,000 | 1,800,000 | 2,000,000 |
Process and procedures cost savings |   | 500,000 | 900,000 | 1,200,000 | 1,500,000 | 1,800,000 |
Working capital savings | 900,000 | 1,200,000 | 1,500,000 | 1,500,000 | 1,500,000 | 1,500,000 |
Total Savings | 1,500,000 | 3,300,000 | 4,600,000 | 5,500,000 | 6,400,000 | 7,300,000 |
Average SAP licence cost |   | 150,000 | 200,000 | 225,000 | 250,000 | 250,000 |
Cost to convert old data to new data | 100,000 | 160,000 | 180,000 | 560,000 | 600,000 | 640,000 |
Cost of overheads | 300,000 | 420,000 | 490,000 | 560,000 | 600,000 | 640,000 |
Cost of system maintenance and firewalls | 60,000 | 120,000 | 130,000 | 140,000 | 150,000 | 160,000 |
Cost of hardware expansion |   | 260,000 | 300,000 | 340,000 | 380,000 | 400,000 |
Cost of training | 500,000 | 800,000 | 900,000 | 1,000,000 | 1,100,000 | 1,300,000 |
Total Costs | 960,000 | 1,910,000 | 2,200,000 | 2,825,000 | 3,080,000 | 3,390,000 |

Year | 1 | 2 | 3 | 4 | 5 | 6 |
Total Savings | 1,500,000 | 3,300,000 | 4,600,000 | 5,500,000 | 6,400,000 | 7,300,000 |
Total Costs | 960,000 | 1,910,000 | 2,200,000 | 2,825,000 | 3,080,000 | 3,390,000 |
Earnings before tax and depreciation | 540,000.00 | 1,390,000.00 | 2,400,000.00 | 2,675,000.00 | 3,320,000.00 | 3,910,000.00 |
Depreciation cost at 34% | 1,477,092.60 | 974,881.11 | 643,421.53 | 424,658.21 | 280,274.42 | 184,981.12 |
Net book value after depreciation | 2,867,297.40 | 1,892,416.29 | 1,248,994.76 | 824,336.55 | 544,062.13 | 359,081.01 |
Earnings before tax | (937,092.60) | 415,118.89 | 1,756,578.47 | 2,250,341.79 | 3,039,725.58 | 3,725,018.88 |
Suggested Tax Rate 25% | (234,273.15) | 103,779.72 | 439,144.61 | 562,585.45 | 759,931.40 | 931,254.72 |
Earnings after tax | (674,706.67) | 298,885.60 | 1,264,736.50 | 1,620,246.09 | 2,188,602.42 | 2,682,013.59 |
Depreciation Reversal | 1,477,092.60 | 974,881.11 | 643,421.53 |...

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