CHAPTER ONE
1.0Â Â Â Â INTRODUCTION
1.1Â Â Â Â BACKGROUND OF THE STUDY
One pronounced reality of the modern business management is the advanced state of competition and rivalry whereby only the fittest enterprise survives, management however, employs predicted cost which is put in a meaningful manner. Essentially, while making a decision between a number of alternatives, management is always more concerned with the cost and income, difference between alternatives rather than the absolute total themselves.
Due to wealth creation and the satisfaction of business motives, management continues to increase its shares, assets and generally its credit worthiness in the entire economy. This in turn requires an improvement in the quality of decisions. Therefore in order to respond effectively to the challenges of the times, Management requires good decision analysis which leads to this research work.
This research work is principally concerned with investigating into the principles and the application of marginal costing technique at Unilever Nigeria Plc. The study will principally examine:
- The criterion for analysis of costs into fixed and variable components
- How these costs are controlled
- How prices are determined employing the techniques.
- How decision making is aided under the technique.
An appraisal was necessary in order to determine efficiency and effectiveness of this management accounting technique. In carrying out this research work, data were gathered from questionnaire information and analysis of same, employing the percentage method to analyze the responses elicited from the respondents. Also, personal observation method was used coupled with relevant information from libraries.
1.2Â Â Â Â STATEMENT OF THE PROBLEMS
Fixed costs are substantial and increasing proportion of costs in modern industry. Business organizations are therefore facing hard times as a result of the continual drop in profits arising from the arbitrary allocation of costs to products and cost centre.
This arbitrariness in the allocation of cost has given rise to high cost of production, high cost of products and low turnover rate. In the light of this the future of business organizations in Nigeria is bleak.
1.3Â Â Â Â OBJECTIVES OF THE STUDY
The marginal costing technique is the one that differentiates costs clearly into fixed and variable elements. Bearing this in mind, the objectives of this study inter-alia, include:
- Evaluating the marginal costing technique in order to ascertain effectiveness and equally its efficiency.
- To determine the criterion for cost control and analysis
- To generally examine how product decisions are made by management under the technique.
1.4Â Â Â Â SIGNIFICANCE OF THE STUDY
One established fact is that any technique of costing that a profit oriented business organization decided to adopt must be related to profitability. In view of the above fact, any effort that is therefore geared towards establishing how the technique helps in the realization of the profit of the organization will be worthwhile.
Since this has a reciprocal effect, any suggestion towards the improvement of the costing technique should at least, have a modicum of bearing one the improvement of profit. If productivity is to be enhanced considerably and the satisfactory of profit guaranteed, therefore knowledge of cost behavior and equally the analysis is completely necessary. The researcher believes that based on the findings of this very study and the proffered suggestions that the management of the Unilever Nigeria Plc in particularly, if it attaches strong importance to the suggestions that they will go a long way toward enhancing their profit position. The manufacturing industries will equally benefit from the findings of the study.
It is equally hoped that future researcher of this subject matter will find this project work important towards carrying out their respective research works.
