ABSTRACT The study examined the effect of cost management on financial performance of manufacturing firms in Kampala from which Britannia Allied Industries Limited was used as a case study. The research also capitalized on three objectives which requires to determining the effect of material costing, labour costing and overhead costing on financial performance. In this study, internal cost management was used as an independent variable whereas financial performance as a dependent variable. The study employed stratified, simple random and purposive sampling techniques to draw representative samples and a sample size of 60 respondents was determined from a population of 65 members using Slovenes formula. Closes-ended questionnaires with five point like11 scale were used to obtain response. During this research data was carefully collected, classified and analyzed using frequency tables and data was summarized using graphs and charts. The findings of the study revealed that there is a significant effect between cost management and financial performance. This is because the three indicators of cost management researched on showed that on average, over 85% of the respondents believed that an effective cost management system that include material costing, labour costing and overhead costing would ensure effective financial performance to manufacturing firms. Finally, the researcher suggested some recommendations which included sourcing for cheaper & high quality materials, employing an integrated material costing system that traces materials from the point of making orders to when goods are dispersed for use in production, employing experienced labour, dischargi ng unproductive labour, and apportioning overheads to production among others. All these recommendations are focused towards reducing production costs as profits can be improved (since unit profit = unit selling price- unit production cost) hence leading to effective financia l performance.
