THE RAMIFIED FACTORS AFFECTING THE CONCEPT OF PROFITABILITY AS A GUIDE TO POLICY DECISION IN ACCOUNTING

(A CASE STUDY OF SOME MANUFACTURING INDUSTRIES IN OSHIMY SOUTH L.G.A OF DELTA STATE)

By

MICHAEL CHRISTIAN AGADA

Presented To

Department of Accountancy

ABSTRACT

Before I delve into this issue, Let us look from the realistic pomt of view, the concept of profitability- it can be seen as that concepts which provides management with alternatives course of action according in the various degree of profitability, stating dearly in relevant cost accounting from the costs and benefit associated with individual projects which enables management to the most profitable. Majority of the policy decision of manufacturing industries are generally directed towards profitability. Policy decisions made under this concept has direct effect on increasing and enhancing the general profitability of the manufacture industry concerned.

Unfortunately, this laudable guide has been relegated to supportive role in some manufacturing industries because of certain factors million against . Such factors have in most cases affected the profit position of industries and in extreme cases to huge losses, which sometime ding such companies involved for unexpected liquidation.

Hence, this project work tried to know those factors affecting the concept and respective effects on the profit position of the selected industries.

In view of covering the three dimensional focus of the research the project focused on three major areas:

1. The exogenous factors affecting the concept of profitability.

2. The endogenous factors affecting the concept of profitability.

3. The political factors affecting the concept of profitability.

These three areas combined to give a broader view of the factors militating against the concepts of profitability.

TABLE OF CONTENTS

Title page

Approvals page

Dedication

Acknowledgement

Abstract

Table of contents

CHAPTER ONE

INTRODUCTION

1.1 Background of study

1.2 Statement of study

1.3 Purpose of study

1.4 Scope and limitation of study

1.5 Definition of terms

CHAPTER TWO

DEFINITIONS/FUNCTIONS

2.1 Cost

2.2 Material costing

2.3 Labour costing

2.4 Factory overhead

2.5 Costing method

CHAPTER THREE

SUMMARY OF FINDINGS/CONCLUSION AND

RECOMMENDATION

3.1 Finding

3.2 Conclusion/Recommendation Bibliography

Appendix.

CHAPTER ONE

INTRODUCTION

The concept of profitability can be defined as that concept which provides management with alternative course of action according to the various degrees of profitability stating dearly in relevant cost accounting forms, the costs and benefits associated with individual project which enable management for select the most profitable.

It is obvious that majority of the policy decisions of manufacturing industries are generally directed towards profitability. The policy decision made under this concept has direct impacts on increasing and enhancing the general profitability of the manifesting industries concerned.

The origin of this concept can be traced back to era of industrial revolution most business grew from the usual family arrangement to large groups. Resources were pulled together and handed out to other people to manage for the real owners.

Naturally, resources owners must expect a profitable return from their investments. The urgent obligation forced management to seek ways of carrying the activities so as to make profitable reforms to the resource owners. The growth and completing in the individual sectors gave rise to the needs for policy statement or decision on certain issues. Materials must have to be bought in enough quantity to avoid stock out and at the same turn check over stocking.

Labour which is one of the factors of production, must be allowed to operate in a conducive environment so as to reap the benefit of hiring labour. Prior to communication general ecological consideration must reviewed. There after site is augured structures erected, machine and equipment installed.

One take of the manifesting industry must more the champing technology, meet its social responsibilities, operates under government regulations, pay tax as of and when due, meet the expectations of the shareholders. Moreover, high administrative cost of champing technology, herce competitions, cost of government restichons, poor capital base and the needs for maximization of shareholdes wealth must be highlighted and adjusted in such a way that the total cost of manufacturing a product will not only be less than sales revenues but also gives a good profit margin.

1.1 BACKGROUND OF THE STUDY

The nature of this research work required theoretical approach and analysis which will cover the three dimension focus of the research.

The research focused on three major areas:-

i. The endogenous factors affecting the concept of profitability as a guide to policy decisions.

ii. The exogenous factors affecting the concept and

iii. The political factors.

The study of these factors will help the researcher to determine the effects of these factors on the profit position and make subsegment recommendation. The frame work for analyzing the factors affecting the concept of profitability were:

1.11 EXOGENOUS FACTORS

i. Theory of location of industry which states that nearness to raw materials, availability of labour affects the profitability of manufacturing industries e.g the location of extractive industries depends on where the raw materials are to be found.

ii. Theory of nearness to market: Heavy goods are expansive to transfer or transport. Because of this, the theory therefore states that such goods be produced new the market.

iii. Other general economic factors: There must be a ready transport facility for movement of both raw materials and finished goods.

iv. Location of other industries: industries are set up near others in order to take advantage of external economics, an industry enjoyed being close to other industries in the same business or trade.

1.12 ENDOGENOUS FACTORS

There emphasis on the theory of operations management which is of the view that workers have the same objectives with that of management and work towards common ends of management which assumes a responsible attitude towards organizational decision making procedure.

On the political factors the instability of government restrictions on certain industrial activities and active infervention were also theories which will help the researcher to find out the factors affecting the concept of profitability.

1.2 STATEMENT OF STUDY

This research work entitled "Factors affecting the concept of profitability" as a guide to policy decision in accounting ( A case study of some manufacturing industries in our locality) attempted to determine the factors affecting the concept of profitability as a guide to policy decisions

Other study includes:

a) What problems affects the effective application of the concept?

b) What are the researcher of industries to these factors affecting the concept?

c) To what recommendations made based on the findings about the factors affecting the concept?

1.3 PURPOSE OF HE STUDY

This research work is informed by the need to explaining the cares of unfulfilment of the profit objectives of the selected industries through the concept. The profitability of industries encourage them to assume their social responsibilities and participate effectively in the economic growth of the economy of the local government concerned and in the locality where the industries are sited in general. A thorough knowledge of these factors will help existing companies in profit planning.

1.4 SCOPES AND LIMITATION OF STUDY

The scope of the research study will be within the locality where the industry is sited.

LIMITATIONS

The concept of profitability is a vast area of research. There are certain factors which hinder the study of this concept. They are as followed:

TIME

The time factor affects the study of these research work. Ie, the second semester is very short and as a result of this, I have other stannous things in my hands to cover. The time accorded to this study is very short ad brief.

FINANCE

Inadequacy of finance is another factors affecting this humble research, if the verified concept of profitability. Students in school especially me faced a sever hardship. A hot of any money had been spent on bard outs and tents books of unit.

1.5 DEFINITIONS OF TERMS

There are certain words or terms that needs to be explained or defined respectively. This is t enhance understanding of the contents of the research work.

1. Concept of profitability: This could be defied as concept which provides managers of manufacturing industries with alternative courses of action according to the various degree of profitability stating clearly in relevant cost accounting from the costs and benefits associated with individuals project which enable them to select the most profitable.

2. Policy: This means principle and objectives which guide decision making on particular matters and which expresses broad intentions or attitude of the industries. It can be general outline plan of actions setting out terms of operation.

3. Industry: It means a class of forms that are sufficiently similar on their main activities or products to be group together for the purpose of description.

4. Manufacture: It could be defined as a process by which raw materials are being transformed into finished goods using plant and equipments.