Asia Pacific Journal of Marketing & Management Review__________________________________________ ISSN 2319-2836

Vol.2 (4), April (2013)

Online available at indianresearchjournals.com

A STUDY ON MARGINAL COSTING IN GODREJ CONSUMER

PRODUCT LTD
S. SIVA*; MOSES JOSHUVA DANIEL**;
S. SHALINI**

*ASST PROFESSOR
DEPT OF MANAGEMENT STUDIES
ACHARIYA SCHOOL OF BUSINESS & TECHNOLOGY
PUDUCHERRY

**ASST PROFESSOR
DEPT OF MANAGEMENT STUDIES
ACHARIYA SCHOOL OF BUSINESS & TECHNOLOGY
PUDUCHERRY

***MBA STUDENT
DEPT OF MANAGEMENT STUDIES
ACHARIYA SCHOOL OF BUSINESS & TECHNOLOGY
PUDUCHERRY

_____________________________________________________________________________________

Introduction
The costs that vary with a decision should only be included in decision analysis. The
marginal cost of a product – “is its variable cost”. This is normally taken to be; direct labor,
direct material, direct expenses and the variable part of overheads.
It is the technique of presenting cost data wherein variable costs and fixed costs are
shown separately for managerial decision-making. It is simply a method or technique of the
analysis of cost information for the guidance of management which tries to find out an effect on
profit due to changes in the volume of output. These are different phrases being used for this
technique of costing. Marginal costing technique has given birth to very useful concept of
contribution where contribution is given by: Sales revenue less variable cost (marginal cost).
Contribution may be defined as the profit before the recovery of fixed costs. Thus, contribution
goes toward the recovery of fixed cost and profit, & is equal to fixed cost + profit (C = F + P).

Principles of Marginal costing

The fixed costs will be the same for any volume of sales and production (provided that
the level of activity is within the „relevant range‟).

 Revenue will increase by the sales value of the item sold.

 Cost will increase by the variable cost per unit.
 Profit will increase by the amount of contribution earned from the extra item.

a) The volume of sales falls, the profit will fall from amount of contribution.
b) Profit measurement should base on of total contribution since fixed costs relate to period of
time and do not change with increases or decreases in sales volume.

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Asia Pacific Journal of Marketing & Management Review__________________________________________ ISSN 2319-2836
Vol.2 (4), April (2013)
Online available at indianresearchjournals.com

Need of the Study

The need of the study helps the company to identify their position by which the company can
increase or decrease the total cost of production. It also helps the company to identify and offer a
minimum rate of product price according to the expectations of the customer so that the
company‟s sales level will get increased. Hence, it is prepared to understand the study on
marginal cost.

Scope of the Study

 The study covering a period of three years between 2009-2012.
 The study of performance is compared within this period.
 The study covers the financial position of the Godrej consumer Product Ltd.
 The study is focused to analyze the weaker position of the firm.

Objectives of the Study

 To understand the financial position of the company.
 To study the marginal cost of the company.
 To analyze the various elements of marginal cost in Godrej Consumer Products Ltd.
 To study the growth and development of Godrej Consumer Products Ltd.

Testing of Hypothesis

Research Methodology
“A research design is the arrangement of conditions for collection and analysis of data in
manner that aims to combine relevance to the research purpose with economy in procedure”.
This study involves only the secondary data covering a period of three years between 2009-2012.
The secondary data was collected from company‟s website for profile, magazines, articles
relating to marginal cost and management tools. The annual report and cost details provided by
the company. Statistical tools like, Growth Rate, Correlation, T – Test were used.

The Godrej Group:

Established in 1897, the Godrej group has grown in India from the days of the charkha
to nights at the call centers. Our founder, Ardeshir Godrej, lawyer-turned- locksmith, was a
persistent inventor and a strong visionary who could see the spark in the future. His inventions,
manufactured by his brother Pirojsha Godrej, were the foundation of today‟s Godrej empire. One
of India‟s most trusted brand, Godrej enjoys the patronage and trust of around 500 million
Indians every single day. There customers mean the world to us. With 7 major companies with
interests in real estate, FMCG, industrial engineering, appliances, furniture, security and agri
care – to name a few – our turnover crosses 3.3 billion dollars. Godrej as such an integral part of
India – like the bhangara or the kurta – that you may be surprised to know that 25% of our
business is done overseas. It shows more than 60 countries ensure that our customers are at home
with Godrej no matter where they go. With brands customer can believe in, services excellence
they can count and the promise of brighter living for every customer, Godrej knows what makes
India tick today.

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Asia Pacific Journal of Marketing & Management Review__________________________________________ ISSN 2319-2836
Vol.2 (4), April (2013)
Online available at indianresearchjournals.com

Today, a point in Godrej‟s history when our amazing past is meeting up with its
spectacular future head on. Godrej is learning and relishing being young again.

Review of Literature
Marginal Costing is the technique of costing fully oriented towards managerial decision
making and control. This technique can be used in conjunction with any method of cost
ascertainment. It can also be used in combination with technique such as budgeting and standard
costing.
Marginal costing is helpful in determining the profitability of products, departments,
process and cost centers. While analyzing the profitability, marginal costing interprets the cost
on the basis of nature of cost.
The emphasis is on behavior of the costs and their impact on profitability.
Marginal cost is defined by I.C.M.A, London as “the 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. In practice, this is measured by the total variable costs attributable to one unit.”
Marginal cost in other words is variable cost. For a typical manufacturing company the
following elements of costs are variable or marginal costs:
 Direct material
 Direct wages
 Direct expenses
 Variable overheads
Thus, Marginal Cost = Prime cost + Total variable overheads
Or
Marginal Cost = Total cost - fixed cost

Production Quantity:
It determines the quantity of company or retailer should order to minimize the total
inventory costs by balancing the inventory holding cost and average fixed ordering cost.

Clearance Quantity:
It is the price of goods or a service at which quantity supplied is equal to quantity
demanded, also called the equilibrium price. Another clearing quantity may be a price below
equilibrium price to stimulate demand.

Assessable Value:
The value of goods taken in course for calculation of vat is called assessable value. The
concerned officer may increase often it if he finds deviations or absence of justified co-relation
between the input or purchase value and sale value.

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Asia Pacific Journal of Marketing & Management Review__________________________________________ ISSN 2319-2836
Vol.2 (4), April (2013)
Online available at indianresearchjournals.com

Table No.1 show the growth rate of Production Quantity of

Godrej Consumer Product Ltd.
Growth Rate Growth Rate Of
2009-10 2010-11 2011-12
Months Of 2009-11 2010-12
(Rs.lak) (Rs.lak) (Rs.lak)
% %
April 11891 1584 51528 -86.67 3153.03
May 24586 16105 26224 -34.49 62.83
June 35274 43750 30927 24.02 -29.30
July 40185 40868 37479 1.69 -8.29
August 24789 48886 37195 97.20 -23.91
September 26832 55484 53419 106.78 -3.72
October 30428 52132 60872 71.32 16.76
November 39036 56291 62979 44.20 11.88
December 63293 73595 34663 16.27 -52.90
January 16479 49345 41615 199.44 -15.66
February 37500 47005 43337 25.34 -7.80
March 39867 35747 54387 -10.33 52.14
Grand Total 390160 520792 534625 454.80 3155.04
Mean 32513.33 43399.3 44552.08 37.90 262.92
Std. D 13405.79 18919.2 11922.16 74.30 910.73
Source: Secondary data
The table 1 identifies that growth rate of Production Quantity shows the month of April in all the
year is considered to be high. It cross above 3,000 where as the rest of the months are below 100. Hence
the other months are goes on declining.
Table No.2 show the Growth rate of Clearance Quantity of
Godrej Consumer Product Ltd.
2009-10 2010-11 2011-12 Growth Rate of Growth Rate of 010-
Months
(Rs.lak) (Rs.lak) (Rs.lak) 2009-11 % 2012 %
April 13312 1584 48529 -88.10 2963.69
May 23674 15285 28135 -35.43 84.06
June 33168 41212 31018 24.25 -24.73
July 41699 40299 37859 -3.35 -6.05
August 26333 46556 35450 76.79 -23.85
September 22932 60241 54515 162.69 -9.50
October 34004 52957 54571 55.73 3.04
November 38996 53139 61826 36.26 16.34
December 44255 72557 38344 63.95 -47.15
January 34223 49332 46295 44.14 -6.15
February 38956 48048 40802 23.33 -15.08
March 40127 39592 55793 -1.33 40.91
Grand Total 391679 520802 533143 358.96 2975.54
Mean 32639.92 43400.17 44428.08 29.91 247.96
Std. D 9273.368 18960.78 10770.31 61.97 855.91
Source: Secondary data
The table 2 identifies that growth rate of Clearance Quantity shows the month of April in
all the year is considered to be high. It cross above 2,500 where as the rest of the months are
below 100. Hence the other months are goes on declining when compared to April.

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Asia Pacific Journal of Marketing & Management Review__________________________________________ ISSN 2319-2836
Vol.2 (4), April (2013)
Online available at indianresearchjournals.com

Table No.3 show the growth rate of Assessable Value of

Godrej Consumer Product Ltd.
Growth Rate Growth Rate
2009-10 2010-11 2011-12
Months Of 2009-11 Of 2010-12
(Rs.lak) (Rs.lak) (Rs.lak)
% %
April 14536704 163200 30458421 -98.87 18563.24
May 15714048 12143250 25270573 -22.72 108.10
June 27411300 26359334 33783368 -3.83 28.16
July 40400170 33460434 38491278 -17.17 15.03
August 21717784 26684360 33039510 22.86 23.81
September 13672565 34183934 38072084 150.01 11.37
October 25011701 35898610 31364172 43.52 -12.63
November 23929500 32069360 35055342 34.01 9.31
December 24746400 38186610 22475880 54.31 -41.14
January 19290755 36995306 47470490 91.77 28.31
February 26536436 36751588 46276272 38.49 25.91
March 30010983 29966270 45773532 -0.148 52.75
Grand Total 282978346 344362256 427531222 292.24 18812.26
Mean 23581528.8 28571854.7 35627576.8 24.35 1567.68
Std. D 7476657.95 11437444.9 8013194.84 62.09 5352.33
Source: Secondary data
The table 3 identifies that growth rate of Assessable value shows the month of April in all
the year is considered to be high. It cross above 15,000 where as the rest of the months are below
100. Hence the other months are goes on declining.
Correlation Results
Table No.4 correlation results for 2009 -10
Production Clearance Assessable
Particulars
Quantity Quantity Value
Production Pearson Correlation 1 .806(**) .567
Quantity Sig. (2-tailed) . .002 .055
Clearance Pearson Correlation .806(**) 1 .768(**)
Quantity Sig. (2-tailed) .002 . .004
Pearson Correlation .567 .768(**) 1
Assessable Value
Sig. (2-tailed) .055 .004 .
Source: Secondary Data
** Correlation is significant at the 0.01 level (2-tailed)

From the above table correlation results that there is perfect positive correlation between
clearance and production quantity (.806) and between assessable value and clearance quantity
(.768). There is no correlation between production and assessable value.

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Asia Pacific Journal of Marketing & Management Review__________________________________________ ISSN 2319-2836
Vol.2 (4), April (2013)
Online available at indianresearchjournals.com

Table No.5 correlation results for 2010-11

Production Clearance Assessable

Particulars
Quantity Quantity Value
Production Pearson Correlation 1 .992(**) .903(**)
Quantity Sig. (2-tailed) . .000 .000
Clearance Pearson Correlation .992(**) 1 .920(**)
Quantity Sig. (2-tailed) .000 . .000
Pearson Correlation .903(**) .920(**) 1
Assessable Value
Sig. (2-tailed) .000 .000 .
Source: Secondary Data
** Correlation is significant at the 0.01 level (2-tailed).

From the above table correlation results that there is perfect positive correlation between
production and clearance quantity (.992) and production and assessable value (.903) and also has
positive correlation between assessable and clearance quantity (.920). There is no correlation for
production quantity.

Table No.6 correlation results for 2011-12

Production Clearance Assessable

Particulars
Quantity Quantity Value
Production Pearson Correlation 1 .969(**) .287
Quantity Sig. (2-tailed) . .000 .366
Clearance Pearson Correlation .969(**) 1 .344
Quantity Sig. (2-tailed) .000 . .273
Pearson Correlation .287 .344 1
Assessable Value
Sig. (2-tailed) .366 .273 .
SOURCE: Secondary Data
** Correlation is significant at the 0.01 level (2-tailed).

From the above table correlations results that there is perfect positive correlation between
production quality and clearance quality (.969). There is no correlation between production
quality and assessable value.

Testing of Hypothesis

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Asia Pacific Journal of Marketing & Management Review__________________________________________ ISSN 2319-2836
Vol.2 (4), April (2013)
Online available at indianresearchjournals.com

Table 7 T-Test result of Hypothesis-1

N Mean Std. Deviation

Production Quantity 12 32513.3333 13405.78792
Assessable Value 12 23581528.8333 7476657.95777

T-Test results

t Df Sig. (2-tailed) Mean Difference

Production Quantity 8.402 11 .000 32513.3333

Assessable Value 10.926 11 .000 23581528.8333

The calculation t value (10.926) is greater than the significant value (0.000); hence null
hypothesis is rejected. So when production quantity increases, assessable value also increases.

Hypothesis – 2

Table 8 T-Test results of Hypothesis-2

N Mean Std. Deviation
Production Quantity 12 32513.3333 13405.78792
Clearance Quantity 12 32639.9167 9273.36797

T –Test results

t df Sig. (2-tailed) Mean Difference

Production Quantity 8.402 11 .000 32513.3333

Clearance Quantity 12.193 11 .000 32639.9167
The calculated t value (12.193) is greater than the significant value (0.000); hence
null hypothesis is rejected. So when production quantity increases, clearance quantity also
increases.
Hypothesis - 3

Table 9 T-Test results of Hypothesis-3

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Asia Pacific Journal of Marketing & Management Review__________________________________________ ISSN 2319-2836
Vol.2 (4), April (2013)
Online available at indianresearchjournals.com

N Mean Std. Deviation

Production Quantity 12 43399.3333 18919.25148
Assessable Value 12 28696854.6667 11102019.24592

T –Test results

t df Sig. (2-tailed) Mean Difference

Production Quantity 7.946 11 .000 43399.3333

Assessable Value 8.954 11 .000 28696854.6667

The calculation t value (8.954) is greater than the significant value (0.000); hence null hypothesis
is rejected. So when production quantity increases, assessable value also increases.

Hypothesis – 4
: When production quantity increases, clearance quantity remains the same.
: When production quantity increases, clearance quantity decreases.

Table 10 T – Test results of Hypothesis-4

N Mean Std. Deviation
Production Quantity 12 43399.3333 18919.25148
Clearance Quantity 12 43400.3333 18960.74276

T – Test results

t df Sig. (2-tailed) Mean Difference

Production Quantity 7.946 11 .000 43399.3333

Clearance Quantity 7.929 11 .000 43400.3333
The calculated t value (7.929) is lesser than the significant value (0.000);
hence null hypothesis is rejected. So when production quantity increases, clearance quantity has
been decrease.

Hypothesis-5
: When Production Quantity increases, assessable Value remains same
: When Production Quantity increases, assessable value also increases.

Table 11 T – Test results of Hypothesis – 5

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Asia Pacific Journal of Marketing & Management Review__________________________________________ ISSN 2319-2836
Vol.2 (4), April (2013)
Online available at indianresearchjournals.com

N Mean Std. Deviation

Production Quantity 12 44552.0833 11922.15554

Assessable Value 12 35460935.1667 7968935.56495

T – Test results

t df Sig. (2-tailed) Mean Difference

Production Quantity 12.945 11 .000 44552.0833

Assessable Value 15.415 11 .000 35460935.1667

The calculation t value (15.415) is greater than the significant value (0.000); hence null
hypothesis is rejected. So when production quantity increases, assessable value also increases.
Hypothesis – 6
: When Production Quantity increases, clearance quantity remains same
: When Production Quantity increases, clearance quantity also increases.

Table 12 T – Test results of Hypothesis - 6

N Mean Std. Deviation
Production Quantity 12 44552.0833 11922.15554
Clearance Quantity 12 44428.5833 10770.12359

T – Test results

t df Sig. (2-tailed) Mean Difference

Production Quantity 12.945 11 .000 44552.0833

Clearance Quantity 14.290 11 .000 44428.5833

The calculation t value (14.290) is greater than the significant value (0.000); hence null
hypothesis is rejected. So when production quantity increases, assessable value also increases.

Findings

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Asia Pacific Journal of Marketing & Management Review__________________________________________ ISSN 2319-2836
Vol.2 (4), April (2013)
Online available at indianresearchjournals.com

From the table: 3 the result shows at the month of April the growth rate was increased above
15,000, at the month of May, June, July, August, September the growth rate was at profit level
because it is above 100 percent and below 100 percent. But at the month of October and
September it was decreased to below -100 and rest of the months November, January, February,
and March the growth rate was increased to profit level.
From the table: 4 correlation results that there is perfect positive correlation between clearance
and production quantity (.806) and between assessable value and clearance quantity (.768).
There is no correlation between production and assessable value.
From the table: 5 correlation results that there is perfect positive correlation between production
and clearance quantity (.992) and production and assessable value (.903) and also has positive
correlation between assessable and clearance quantity (.920). There is no correlation for
production quantity.
From the table: 6 correlation results that there is perfect positive correlation between production
quantity and clearance quantity (.969). There is no correlation between production quantity and
assessable value.
From the table: 7 the calculation t value (10.926) is greater than the significant value
(0.000); hence null hypothesis is rejected. So when production quantity increases, assessable
value also increases.
From the table: 8 the calculated t value (12.193) is greater than the significant value
(0.000); hence null hypothesis is rejected. So when production quantity increases, clearance
quantity also increases.
From the table: 9 the calculated t value (7.929) is lesser than the significant value
(0.000), hence null hypothesis is rejected. So when production quantity increases, clearance
quantity has been decrease.
From the table: 10 the calculation t value (15.415) is greater than the significant value
(0.000), Hence, null hypothesis is rejected. So when production quantity increases, assessable
value also increases.
From the table:11 the calculation t value (14.290) is greater than the significant value
(0.000), Hence, null hypothesis is rejected. So when production quantity increases, assessable
value also increases.

Suggestion & Recommendation

 The company should improve more credit facilities to the customers. It will create good
sales.
 The company should concentrate on local sales by sales expert.
 Labor participation in the management should be encouraged.
 The company has to focus on additional unit of the products.

Conclusion
The growth and development of any country is measured in terms of the industrial development
of the country. Industries play a vital role in the development of a nation‟s economy. From the
critical analysis depicted throughout the study, it is evident that the overall performance of the
company with regard to profitability is satisfactory.
Since the Godrej Consumer Product Ltd, is a International company they have to concentrate on
the growth rate at every month of the year not only at beginning of the accounting year. The

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Asia Pacific Journal of Marketing & Management Review__________________________________________ ISSN 2319-2836
Vol.2 (4), April (2013)
Online available at indianresearchjournals.com

basic objective is to develop the industries so that the country need not relay upon others for its
requirements.
Overall, this project was useful and informative for me and helped me to know the growth and
development of the Godrej consumer product ltd.

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5. Deakin, E.B. (1972), “A Discriminant Analysis of Predictors of Business Failure”,
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6. Kothari C.R. (2003), “Research Methodology – Methods & Techniques, Wishawa
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7. Ohlson, James A. (1980), “Financial ratios and the probabilities prediction of
bankruptcy”, Journal of Accounting Research, Vol. 18.
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