CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF STUDY
The basic reality of modern business management in a free enterprise economic system is the level of competition among all the enterprise, where only the filter enterprises survive. The motive for maximization of profit in business and quest for Wealth Creation being in vogue, management continues to remain under increasing obligation to improve its share of the market, its assets, its credit worthiness and its overall potential. 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. This 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 as (a case study of Emenite LTD Enugu). This study will critically examine the following: – The condition for analyzing cost into fixed and variable cost to 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.
STATEMENT OF PROBLEM
1. How does marginal costing reduce the arbitrary allocation of production cost to cost centres? 2. Can production not be increase without increasing the amount of fixed cost? 3. 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?
OBJECTIVES OF STUDY
Marginal costing as an essential tool for decision making. Marginal costing technique of cost accounting tends to separate cost into variables and fixed cost. The objectives of this study among other things are as follows: – An evaluation of the marginal costing technique towards ascertaining its effectiveness and efficiency. – To determine the condition for cost control and analysis Examine how management under this technique makes product decisions. Finding out any inherent deficiencies in its application
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