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Product Category: Projects

Product Code: 00000588

No of Pages: 76

No of Chapters: 5

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This study focused on          the Marginal Costing and Organizational Performance in Nigeria Breweries Plc. Marginal costing techniques is an important tool for making managerial decisions to ascertain the most appropriate technique to be used in presenting costing information by management accountants to the organization stakeholders and evaluating the extent to which marginal costing affect the setting of pricing method. Relevant data were collected from both primary and secondary sources. Questionnaire was the main source of data collected, instrument employed, while data from various relevant publications constituted the sources of secondary data such as the questionnaires administered were sixty (60), chi-square was used to analyze the data. Two hypothesis were tested: 259>9.488 which shows that marginal costing techniques is the best techniques for short term decision making while the second hypothesis tested gave 248.6 > 9.488 which indicates that strict adherence to marginal costing technique enhance the profitability in manufacturing company. Based on the findings the study established that the marginal costing technique is one of the key aspects of the management accountant responsibilities. The management accountant ascertain whether the technique contributes to high quality decision making which help in reporting on marginal costing techniques to Nigerian Breweries Plc, and the extent to which reliance can be placed on the technique. The overall objective of any organization is to maximize profit and maximization the wealth of its shareholders. Based on the findings and conclusion arrived at in this study, its recommends that the practicing of marginal costing techniques identify relevant cost and provide information to management on effect of cost and revenue of charges in volume of output in the short run and to absorbed into product cost along with variable cost.











Contents                                                                                                                   Pages

Title     Page                                                                                                                i

Certification                                                                                                                ii

Dedication                                                                                                                  iii

Acknowledgement                                                                                                      iv

Abstract                                                                                                                                  v

Table of Contents                                                                                                       vi



1.1              Background of the Study                                                                               1

1.2              Purpose of Study                                                                                            4

1.3              Research Questions                                                                                         4

1.4              Statement of Hypothesis                                                                                5

1.5              Significance of Study                                                                                     6

1.6              Organization of the Study                                                                              7

1.7              Limitation and Scope of Study                                                                      7

1.8              Definition of Terms                                                                                        8

Reference                                                                                                                    10



2.1              Introduction                                                                                                    11

2.2              Application of Marginal Costing – Make or Buy Decision    22

2.3              Cost Behaviour                                                                                               24

2.4              The Treatment of Fixed Costs                                                                        28

2.5              Marginal Costing Techniques Versus Absorption

Costing Technique                                                                                          32

2.6              Application of Marginal Costing Techniques                         33

2.7              Decision Making with Limiting Factors And

Product Mix                                                                                                    35

2.8              Benefits of Marginal Costing                                                             36

2.9              Problems of Marginal Costing                                                                        37

2.10          Current Literature Based on Each Relevant Variable,

Model and Theory                                                                                          38

2.11          Basic Concept of Cost Accountancy                                                  40

2.12          Cost Accounting                                                                                             47

2.13          Contribution Margin                                                                                       56

2.14          Historical Background of Nestle Nigeria Plc                         58

References                                                                                                      62



3.1              Introduction                                                                                                    63

3.2              Research Design                                                                                             63

3.3              Re-Statement of Research Questions                                                 64

3.4              Re-Statement of Research Hypotheses                                              64

3.5              Population of the Study                                                                                  65

3.6              Sample and Sampling Technique                                                        65

3.7              Research Instruments                                                                          66

3.8              Methods of Data Collection                                                               67

3.9              Analytical Tools                                                                                              67

3.10          Reliability of Instrument                                                                                 68

3.11          Validity of Instrument                                                                                    68



4.1              Introduction                                                                                                    69

4.2              Analysis and Interpretation of Data                                                   69

4.3              Testing of Hypotheses and Interpretation                                          83

4.4              Discussion of Tested Hypotheses                                                       85



5.1              Summary                                                                                                                     86

5.2              Conclusion                                                                                                      87

5.3              Recommendation                                                                                            87

5.4              Suggestion for Further Studies                                                                       89

Bibliography                                                                                                   90













To measure the marginal cost of public funds accurately, there is need to take account of the full response in the private sector to an increase in tax rates: the tax induced shifts in the allocation of time between labour, do-it-yourself activities and leisure, the allocation of purchasing power among goods and between consumption and investment, and tax-payers’ incentives to tax avoidance and tax evasion. Simplifications are required if the marginal cost of public funds is to be measured at all.

Marginal cost of funds is an indicator of the required benefit-cost ratio for public projects, programs and activities, where “benefit” refers to the sum of all benefits to whosoever they may accrue and “cost” refers to the required public expenditure, excluding deadweight loss or excess burden of taxation to the tax payer.

There are two principal methods of measuring the marginal cost of public funds. Browning (2000). The first is to estimate the extra deadweight loss from identifiable distortions in the tax system. Campbell (1972 and 1975) computed the additional deadweight loss per dollar of additional tax revenue associated with the\imputed excise taxes on all goods consumed, the assumption being that all such taxes would be increased slightly but proportionately when extra revenue is required. Soon after, Browning (1976) estimated the additional deadweight loss dollar of additional tax revenue associated with the labour-leisure choice when leisure is exempted from the base of the income tax. The other method, exemplified by Feldstein (1995), is to estimate the elasticity of tax base to tax rate from observation actual changes in peoples’ reported taxable income in response to legislated changes in tax rate.

Notwithstanding the accuracy of the measurements, the matter is of the greatest importance because appropriate rates of taxation and the appropriate role of the government in the economy depend critically on what the marginal cost of public funds turns out to be. An estimate of the marginal cost of public funds is especially important for assessing the claim that public expenditure is on the wrong side of the Laffer curve, implying as it does that extra revenue could be acquired by lowering, rather than raising, tax rates. Campbell and Browning estimate the marginal cost of public funds at about 1.25, a level high enough to block some government expenditure but not to drive the economy to the wrong side of the Laffer curve. Feldstein, on the other hand, produces an estimate so high that, if it is right, the United States government could increase tax revenue by lowering tax rates. For a critique of Feldstein’s / method, see Goolsbee (2002). For a discussion of some recent estimates see Ballard and Fullerton (1992).


The problems for this study are;

i.            The Budgeted margin of safety in terms of sales value in a manufacturing organization

ii.          Lack of marginal costing values closing stock using variable cost of production.

iii.        Inability to emphasize the behavioural classification of marginal costing on absorption costing techniques.

iv.        The menace of marginal costing technique, decision making technique and absorption costing is still a major concern on recording purposes and in preparing financial reports in manufacturing organizations


The objective of this research work is to examine critically impact of marginal costing technique as an important tool for making managerial decisions. Other specific include;

i.      To highlight the relationship between marginal costing and absorption for short term decision making.

ii.     To ascertain the most appropriate technique to used in presenting adopted costing information by management accountants to the organization stakeholders.

iii.    Evaluating the extent to which marginal costing affect the setting of pricing method.                          

v.           To examine whether marginal costing aids management to in achieving high profitability level.

v.     Ascertain relevant costs to be incorporated in marginal costing computation


1.     How effective is marginal costing techniques in enhancing short term decision making?.

2.     To what extent does costing information enhances stakeholders understanding?

3.     Does strict adherence to marginal costing technique enhance profitability of organization?

4.     Does marginal costing techniques serves as a tool for planning short term decisions?



The following hypotheses are considered as the basis for the questions set for this study.

Ho: Marginal costing technique is not the best technique for short term decision making

Hi:  Marginal costing technique is the best techniques for short term decision making


Ho: Strict adherence to marginal costing technique does not enhance profitability

Hi:   Strict adherence to marginal costing technique enhance profitability


The study is expected to be tremendously help students and managers of manufacturing production sector of the economy. At the end of the study, it would be clearly understood and appreciated that marginal costing is a useful technique if adopted to meet the diverse conditions which apply in a real life environment.

The accounting terms and management, after this research work will now see to the fact a marginal costing technique is necessary. It will help to reduce the work done by management and make job less complex and cumbersome.

This study will also be used to enhance short term decision making from the bondage of financial troubles woes. At the end of the study would be appreciated, how and why marginal costing can be an important and necessary aid to decision making.

In conclusion, the research study will be useful to Auditors, management of companies, research institutions, professional dies and general public.


MARGINAL COSTING: This is a decision making technique used to determine the effect of cost on changes in the volume of time and output in a multi product firm especially in the short run. It treats direct costs and variable factory over head as product cot while treating all the fixed overheads as period cost.

ORGANIZATION:  is a social group which distributes tasks for a collective goal.

ABORPTION COSTING: This is technique which absorbs fixed overhead into period cost through the use of a pre-determine overhead absorption rate which is Get annually after budgeted overhead are allocated to cost centres.

MANUFACTURING:         The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale.

MANAGEMENT ACCOUNTING: This is define as the application of professional knowledge and skill in the preparation of accounting information in order to as management in formulation of policies and in planning and control

COST: This is the resource sacrificed or foregone to achieve a specific objective. It is usually measured as the monetary amount that must be paid to acquire goods and services.

DIRECT COSTS: Are related to the particular cost object arid can be traced to it in an economically feasible way.

INDIRECT COSTS: Can be described as the cost incurred for a period which certain output and turnover limits, tend to be unaffected by fluctuations in the levels of activity.

VARIABLES COSTS: Items of which tends to vary in direct proportion to changes in the volume of output of the cost center to which they relate.

OVERHEADS: Refer to any cost which is not directly attributable to a cost unit. In other overhead is the total of indirect material cost, indirect labour cost and indirect expenses.

BREAK EVEN ANALYSIS: This is the term given to the study of interrelationship among costs. Volume and profits at variables levels of activity. At break even point, neither profit nor loss is made.

CONTRIBUTION: This is the difference between the sales and v costs of product in a given period of time.

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