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FEATURES OF MARGINAL ANALYSIS IN ADMINISTRATION OF MANAGEMENT DECISIONS

Economic and Social Development: Book of Proceedings, 2020, Vol.2-4, p.377-382

Copyright Varazdin Development and Entrepreneurship Agency (VADEA) Jun 18/Jun 19, 2020 ;ISSN: 1849-6903 ;EISSN: 1849-7535

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  • Title:
    FEATURES OF MARGINAL ANALYSIS IN ADMINISTRATION OF MANAGEMENT DECISIONS
  • Author: Vagif, Leyla Mammadova
  • Subjects: Corporate profits ; Correlation analysis ; Cost analysis ; Costs ; Decision analysis ; Economic forecasting ; Economics ; Equilibrium ; Financial leverage ; Indicators ; Management ; Management decisions ; Marginal analysis ; Operating leverage ; Production capacity ; Profitability ; Sales
  • Is Part Of: Economic and Social Development: Book of Proceedings, 2020, Vol.2-4, p.377-382
  • Description: In the conditions of dynamic development of the economy, the task of making effective managerial decisions is becoming increasingly important for domestic enterprises. A special role in substantiating management decisions is assigned to marginal analysis. To form a qualitatively new level of management, it is necessary to justify management decisions as fully as possible and clearly evaluate their effectiveness at all levels of management. Margin analysis establishes a correlation between the most important indicators characterizing the activity of any enterprise - costs, volume and profit. Using this tool, enterprise management can predict the amount of profit, its change compared to the existing level and, based on this information, make the right managerial decisions on choosing an enterprise strategy. With the help of margin analysis, other management decisions are also substantiated: a choice is made of a change in production capacity, the product range is determined, the price of a new product is made, a decision is made on the purchase or purchase of component parts, the effectiveness of accepting an additional order is evaluated, and others. The methodology of marginal analysis is based on the study of the relationship between the most important indicators: costs, volume of production (sales) of products, profit, as well as forecasting the magnitude of each of these indicators for a given value of others. This analysis is also called breakeven analysis, since this analysis allows you to find the equilibrium point, i.e. critical sales volume, or break-even point - the point at which the total revenue is equal to the total cost. They represent the sum of fixed and variable costs. Break-even point is a situation in which the company does not incur losses, but also has no profit. Sales below the breakeven point mean losses for the enterprise, above the equilibrium point - profit. The key elements of marginal analysis are operational, financial leverage, the stock of financial strength of the enterprise, the threshold of profitability. This article explores marginal analysis as a tool for making effective management decisions. The importance of using margin analysis to select an enterprise development strategy is noted. The basis of the marginal analysis is the division of production and marketing costs depending on changes in the volume of production into variables and fixed. The article discusses the content, advantages and disadvantages of various methods of dividing costs into constant and variable components. The author also considered the stages of margin analysis, provides examples of the calculation of the main indicators used in the analysis, substantiates their role in enterprise management.
  • Publisher: Varazdin: Varazdin Development and Entrepreneurship Agency (VADEA)
  • Language: English
  • Identifier: ISSN: 1849-6903
    EISSN: 1849-7535
  • Source: ProQuest Central
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