MARGINAL COSTING TECHNIQUES: IT’S EFFECTIVENESS AS MANAGERIAL TOOL FOR PROFIT PLANNING AND DECISION-MAKING IN MANUFACTURING COMPANIES. (A CASE STUDY OF SELECTED MANUFACTURING COMPANY IN ILORIN, KWARA STATE.
TABLE OF CONTENT
Table of Content
CHAPTER ONE: INTRODUCTION
- Background of the Study
- Statement of Research
- Justification of the Study
- Objective of the Study
- Statement of Hypothesis
- Scope of the Study
- Definition of Term
- Plan of the Study
CHAPTER TWO: LITERATURE REVIEW
2.1.1 Stock Valuation and Operating Under Marginal Costing
2.1.2 The Difference between Marginal Costing and Other Related Concept. Absorption Costing.
2.2 Development of the Basic technique Used in Marginal Costing Approach
2.2.2 Integration of Cost Accounting and Financial Accounting
2.3 Cost Volume-Profit (C.V.P) Analysis; An application of marginal Costing.
2.3.1 Approaches To Cost-Volume Profit Analysis
188.8.131.52 Equation/Mathematical Approach
184.108.40.206 Contribution Margin/Unit Approach
220.127.116.11 Contribution Margin for the Approach
18.104.22.168 Graphical Approach
2.3.3 Criticism and Limitation of Cost-Volume Profit Analysis
2.3.4 Importance and Application of Cost Volume Profit Analysis
CHAPTER THREE: RESEARCH METHODOLOGY
3.2 Research design
3.3 Population of the study
3.4 Source of Data
3.5 Sampling Method
3.6 Data Collection
3.7 Data Analysis Procedures
CHAPTER FOUR: ANALYSIS AND INTERPRETATION OF DATA
4.2 Regression Analysis
4.2.1 International Tobacco Company Plc; Manufacturing Cost Progression Analysis
4.2.2 (a) International Tobacco Company Plc; Operating Profit Progression Analysis
4.2.3 (b) 7up Bottling Company, Ilorin Operating Profit Regression Analysis.
4.3 Test of Hypothesis and Interpretation of Result
4.3.1 Hypothesis One
4.3.2 Hypothesis Two
4.4 Summary of the Result Finding
CHAPTER FIVE: SUMMARY, CONCLUSION AND POLICY RECOMMENDATION
All over the world, business are set up ultimately to make and maximize profit. Effective planning is sino-qua-non to the attainment of this objective. Since profit is the “Life Wire” of any organization, it becomes expedient that such profits be planned for and by doing, decisions capable of affecting the long term efficiency of the business are made.
This study is carried out to test the effectiveness of marginal costing techniques as a management tool for profit planning and decision making in manufacturing companies. Two hypothesis were tested on the effectiveness or otherwise of marginal costing technique and the relationship between three significant valuable (cost, volume and profit) in profit planning and decision making
The finding of the analysis carried out suggested that marginal costing is a vital tool in the area of profit) planning and solid decision making.
However, marginal costing technique is not totally independent and therefore should not isolated from other techniques. The combination of the techniques with other powerful techniques such as budgetary system, overhead absorption costing e.t.c. will produce a better result.
Finally, for marginal costing techniques to serve its purpose there are a number of limiting assumption upon which it is based and these must be fully recognized.
Marginal costing techniques plays an important role in a manufacturing companies and also have effectiveness as a managerial tool for profit planning and decision making in manufacturing companies, in which over the years have been used by management cadire in planning the profit of an organization and had also served as a necessary tools in management decision making especially in the short-run.
The ultimate goal and objectives of any business organization is to make and maximize profit. This technique place emphasis on the separation of cost into their fixed and variable component hence, there is no clear out dichotomy between cost, volume and profit at different level of activities, where can be a useful guide in short term planning and decision making.
Marginal cost can be best applied to the following areas:
- Profitability of Department or Product: Marginal costing form is very useful for determining whether or not a department should continue to operate or whether a product should be eliminated.
- Profit Planning: Profit is not just accidentally or just a matter of luck. It must be purposely and deliberately planned for. According to Stephen A. Moscow.
- Reporting to Management: Marginal costing techniques cal also be used for both internal and external report to be and middle management.
- Controlling: the main purpose of a report is to take any necessary corrective action or measure which will take the form of control.
Controlling can be used to achieve reporting function. The fact that controlling is useful for reporting lie, on the fact that before accounting result can be reported to the management, the concerned department must have made attempts to control the solution before reporting to the management for the final decision making.
1.2 BACKGROUND OF THE STUDY
The success of any entity is measured in terms of the accomplishment. Its goals and objectives “A business objective is the study point business thinking and it provides direction for action and is also a way of measuring and effectiveness of action taken”.
The ultimate goal and objectives of any business organization is to make and maximize profit. Profit itself can be defined as the excess of total income over total cost incurred in the procurement of that income through other objectives such as maximizing shareholders wealth, turnover and benefit to employee are usually taken into consideration; maximum profitability is usually the ultimate goals because it ensures economic natural selection. That is, people will naturally proffer to invest in business with high profitability and on the long run, only profit maximizers survive the business environment.