MARGINAL COSTING AS A TOOL FOR MANAGEMENT DECISION MAKING.(A CASE STUDY OF ANAMMCO LTD ENUGU)

Abstract

The project titled “marginal costing as a tool for management decision making” a case study of ANAMMCO Ltd Enugu, was undertaking to evaluate marginal costing techniques to wards ascertaining its efficiency and effectiveness. The researcher reviewed literatures done by other authors for the purpose of this study. Data were collected from questionnaire and other information gathered were presented on tables, analyzed and conclusion drawn from percentage variations. The research findings includes marginal costing techniques is well adopted by ANAMMCO as a result of its efficiency and effectiveness in operation. The response conclude that this techniques is very essential in organization, though no particular costing technique is in itself a lasting panacea to all organizational ailment or problems but depends on what the management needs. The researcher recommends for the provision of raw materials in advance, which will assist in reduction of customers dissatisfaction.

 

 

 

Table of content

Title page                                                                          i

Approval/certification page                                               ii

Dedication                                                                  iii

Acknowledgement                                                             iv

Abstract                                                                     v

Table of content                                                         vi

CHAPTER ONE

INTRODUCTION

1.1  Background of the study                                             1

1.2     Statement of problems                                               3

1.3     Objective of the study                                                4

1.4     Research questions                                                    5

1.5     Significance of the study                                            5

1.6     Scope of the study                                                      6

1.7     Limitations of the study                                             6

1.8     Definition of terms                                                     7

CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1      Framework                                                          10

2.2     The principles of marginal cost                                   17

2.3     Marginal costing and decision making                        20

2.4     Marginal versus absorption costing                                   32

2.5     Marginal costing and profit                                         41

2.6     The effect of marginal cost system on decision making 43

CHAPTER THREE

RESEARCH DESIGN AND METHODOLOGY

3.1      Research design                                                  45

3.2     Area of study                                                              45

3.3     Population of study                                                    45

3.4     Sources of data                                                   45

3.5     Sample method                                                   46

3.6     Research instrumentation                                   47

3.7     Validity and reliability of research instruments          47

3.8     Methods of investigation                                            48

CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS

4.1      Data presentation                                                      49

4.2     Data  analysis                                                            49

CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION

5.1      Summary findings                                                      55

5.2     Conclusion                                                           56

5.3     Recommendation                                                 58

Bibliography       

Appendix      I

       Appendix II

 

CHAPTER ONE

INTRODUCTION

1.1  Background of Study

       The reality of modern business management in a free enterprise economic system is the level of competition among all the enterprise, where only the fittest enterprises survive.  The measure objective of every organization is profit maximization. This could be achieved through? The involvement of costing methods that should assist in decision making of make buy.  

These in turn require an improvement in the quality of decision.  Therefore in order to respond effectively to the challenges of time, management requires good factors in business decisions. The research work is a real attempt to investigate into the principle and practice of marginal costing as an essential tool for decision-making in Manufacturing Companies using Anambra Motor Manufacturing Company (ANAMMCO) as a case study.  

The study will critically examine the following:

-      The condition for analyzing cost into fixed and variable components.

  -    How the cost are normally controlled,

-      And how management decision in aided under the      technique.

An appraisal is necessary in order to determine effectiveness and efficiency of the management accounting technique.  In carrying out this research work, data was got from questionnaire.

Information and analysis of the data, using the percentage method to analyze the response elicited from respondents.  Also the personal observation methods were used, together with relevant information from libraries.

Against the background of rapid economic growth, the Federal Military Government in 1975 was faced with the enormous task of developing the country’s infrastructure from one geared toward peasant farming to one oriented towards mechanized agriculture and industry.

The Anambra Motor Manufacturing Company is the result of the economic and technological co-operation between the government and the people of Nigeria and DAIMLER-BENZ AG OF West Germany. 

The company is located at Emene Industrial layout, Enugu.  The site covers an area measuring over 300,000 square meters generously leased by the state government.

1.2  Statement of Problem

In this study we are to answer the questions listed below:

a.          When management is faced with two or more alternative choices of product, is marginal costing a

 

useful tool for selecting or choosing the best alternative?

b.          With this techniques applied in costing, can production not be increased hence increasing the amount of fixed cost in t5he production?

1.3  Objectives of Study

       Marginal costing as a tool for management decision-making.  Marginal costing technique of cost accounting tends to separate cost into variables and fixed components.  Bearing this in mind, the objectives of this study among other things include

1.  An evaluation of the marginal costing technique towards ascertaining its effectiveness and efficiency.

2.  Finding out any inherent deficiencies in its application.

3.  To determine the condition for cost control and analysis

 

4.  To Examine how product decisions are made by management under this technique makes.