APPLICATION OF MARGINAL COSTING TECHNIQUE IN A MANUFACTURING COMPANY (A CASE STUDY OF NESTLE NIGERIA PLC)
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APPLICATION
OF MARGINAL COSTING TECHNIQUE IN A MANUFACTURING COMPANY (A CASE STUDY OF
NESTLE NIGERIA PLC)
ABSTRACT
This
research work examines the importance of application of marginal costing
technique in a manufacturing company using Nestle Nigeria Plc as a case study.
It shows that application of marginal costing technique is a survival tool in
Nigeria present economic situation.
It also
shows that effective control of production and distribution of operational cost
arises from the intelligent application of operational control, adequate cost
accounting systems, analysis of cost data and variances, formulation of product
policies and using of already established budgets.
In carrying
out this research work, primary and secondary data were used. The primary
source of data was through questionnaires, which was administered to the
targeted staff. The secondary data method was also used to collect information
for this study and it involves engaging in desk research with review of
relevant textbooks, journals and magazines
The research
study revealed that application of marginal costing is a necessary tool for
organization overall performance.
Based on the
finding of this study, management should put adequate measure in place to
ensure compliance with standard, appreciate the need for training of staff to
improve their level of competence in order to discharge their duties
effectively and efficiently.
TABLE OF
CONTENTS
CHAPTER ONE
2.1 Introduction to the Study
2.2 Historical Background of Nestle Nigeria
Plc
2.3 Purpose of Study
2.4 Significance of Study
2.5 Scope and Limitation
2.6 Hypotheses
CHAPTER TWO
2.0 Literature Review
2.1 Meaning of Marginal Costing
2.2 Theoretical Framework
2.3 The Importance of Marginal Costing To
Management
2.4 Marginal Costing and Pricing
2.5 Advantages and Disadvantages of Marginal
Costing
2.6 Pricing Strategy
2.7 Marginal Costing Vs Absorption Costing
2.8 Principles and Applications of Marginal
Costing Price Fixation
2.9 Accounting Function, Cost Control and
Responsibility Accounting
2.10
Break-Even Analysis
2.11 The
Nigeria Present Economic Situation
CHAPTER
THREE
3.0 Research Methodology
3.1 Research Design
3.2 Research Instrument
3.3 The Use of Questionnaire Method
3.4 Personal Interview
3.5 Population Characteristics
3.6 Sample Size
CHAPTER FOUR
4.0 Analysis of Data and Presentation
4.1 Introduction
4.2 Analysis of Data and Classification
4.3 Analysis of Data According To Test of
Hypothesis
CHAPTER FIVE
5.0 Summary, Conclusion and Recommendation
5.1 Summary
5.2 Conclusion
5.3 Recommendation
Bibliography
CHAPTER ONE
1.0 INTRODUCTION TO THE STUDY
This project
is designed to evaluate the application of marginal costing technique in a
manufacturing company with special reference to Nestle Nigeria Plc as a case
study.
It therefore
examines the techniques of marginal costing as a tool of industrial survival in
the Nigeria present economy. The project will also examine cost control system
of Nestle Nigeria Plc so as to know whether or not a control system exists.
The
effective control of production and distribution of operational cost arises
from the efficient application of operational control, adequate cost accounting
systems, analysis of cost data and variances, formulation of product policies
and using of already established budgets.
Marginal
costing techniques (MCT) will be ascertained in Nestle Nigeria Plc as related
to:
1) Various methods of valuing material
issues.
2) Labour remuneration.
3) Determination of marginal costing per
unit of a product.
4) Purchasing procedures.
5) Store routine, store control and issue
of material.
6) Ascertain actual cost per unit.
Marginal
costing and its application
This is a
well-known concept of economic theory. It may be described as the change in
total cost which arises as a result of an increase and or decrease by one unit
in volume of output. Marginal cost is an amount at any given volume of output
by which aggregate costs are changed if the volume of output is increased or
decreased by one unit.
Marginal
cost is synonymous with variable costs, prime costs plus variable overheads in
the short run but, in a way, would also include fixed cost in the planning
production activities over a long period of time involving an increase in the
productive capacity of business. Theoretically marginal cost and differential
cost are the same. If there is no change in fixed cost then both of these costs
will be same. Thus marginal cost does not include fixed cost at all whereas
differential cost may include an element of fixed cost as well if fixed cost
changes due to a decision.
Marginal
costing is a very important technique of decision making. It is a comparatively
new area in the field of accounting but it is gradually gaining more and more
acceptance. It is the method of matching cost with revenue to determine
periodic income. It is the ascertainment of marginal cost and of the effect on
profit of changes in volume or type of output by differentiating fixed costs
and variable cost. In this context it should be noted that it is not a system
of costing like process or job costing but it is simply an approach to the
presentation of accounting information meaningful to management. In this all
cost are segregated into fixed and variable components. Only the variable costs
are regarded as product cost and are used to value inventory and cost of goods
sold. The fixed costs are treated as period cost and are charged directly to
profit and loss account. Thus no part of fixed manufacturing cost is deferred
to the next period as inventory. While preparing a profit and loss account
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