Marginal Costing as an Essential Tool for Decision Making in a Manufacturing Company

Marginal Costing as an Essential Tool for Decision Making in a Manufacturing Company

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Abstract on Marginal Costing as an Essential Tool for Decision Making in a Manufacturing Company

Decision making has become a main concern to any organization and efforts are being made by management to make sure that best decisions are made.  Therefore, this study investigates the effectiveness and efficiency of marginal costing as an essential tool of decision making. To determine this, the fundamental objectives of the study among others are: An evaluation of the marginal costing technique towards ascertaining the effectiveness and efficiency. Finding out any inherent deficiencies in its application. To determine the criteria for cost control and analysis How products decisions are made by management under this technique and how management decision making is aided under the technique. In investigating the above data were obtained through questionnaire administered to management staff and few senior staff who have knowledge about the technique under application. More so, useful pieces of information were got from libraries. The collected data were classified analyzed and interpreted by tabular discussion and simple percentage analysis and the hypothesis were tested by using the chi-square method.  From the analysis of data, the major findings were that: ANAMMCO apply marginal costing techniques in valuation of stock, cost planning and control. The company purposefully uses this technique for the following reasons: Decision making, controlling of cost, Fixing of prices. ANAMMCO uses marginal costing because it is simple to operate. ANAMMCO uses marginal costing technique because it shows a meaningful and more realistic profit position of the company. The technique easily reveals the contribution made by each product or department. That when faced with decision about the best alternative the marginal costing technique is applied. When there is a special order in deciding whether to accept or reject the special order, marginal costing technique is used. Based on the findings the following recommendation were made: The organization should find a way of ensuring that instrumentality is closely tied to productivity or output of the employee. Due to the difficulty associated were receipt of orders, the orders for basic raw materials should be made long in advance. Where there is a request for special marginal costing should be applied. The company budgetary control system should be supported with the standard costing technique for effective control of materials and labour cost. Above all, I strongly believe that if those recommendations are accepted and vigorously pursued, the decision making will meet the set organizational objectives.

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