COST CONTROL AND ITS EFFECT IN MANUFACTURING COMPANY

By

AGBO JOY C.

Presented To

Department of Accountancy

TABLE OF CONTENTS

Title page ii

Approval page iii

Dedication iv

Acknowledgement v

Table of content vi

Chapter one

Introduction 1

1.0 Background of the study 1

1.1 statement of the problem 2

1.2 Aims and objectives of the study 3

1.3 Significance of the study 4

1.4 Scope and limitations of the study 5

1.5 Research methodology 5

1.6 Organization of the study 6

1.7 Definition of terms 6

References 8

Chapter two

Literature Review 9

2,0 introduction 9

2.1 Overview of cost control 10

2.2 Cost reduction 11

2.3 Controlling cost in an organization 13

2.4 Material cost control 14

2.5 The effect of cost control in manufacturing companies 19

Chapter three

Findings, recommendations and conclusion 20

3.1 Summary/findings 20

3.2 Recommendations 21

3.3 Conclusion 22

Bibliography 24

CHAPTER ONE

INTRODUCTION

1.0 BACKGROUND

With the development in Hi-tech, material sourcing and government economic policies, manufacturing sector is becoming more complex and competitive as day prices of our locally manufactured goods is of public concern. The increase is attributed to high cost of production of goods. It is therefore for this reason that the need for control arose. Besides, the government policy of privatization and commercialization calls for prepardness on the part of manufacturing sector to square up to the staff competition.

Cost control becomes imperative when one looks at the objectives of firms which aomong other thins making as much profit as possible to satisfy tehinventors, becomes a good corporate entity to customers, government, local community and other external members. All these arms are tied to the cost control measures.

Cost control can be done intwo ways:

Operating and accounting controls.

Operating control is done by controlling cost through personal observation and supervision of operations. Such control attempts to minimize wastes idleness, inefficiency of labour and other costs. And accounting control on the other hand entails the creation of system of recording, which will establish accountability for costs that is comparison with standard.

It is therefore against this background that this study attempts to critically x-ray the effects of cost control in a manufacturing organization.

1.1 STATEMENT OF THE PROBLEM

The manufacturing organizations are faced with those problems peculiar to any new innovation especially in a already distressed economy. In Nigeria, it has been observed that because of persistent rise in price of locally produced goods and deregulation of the economy, the manufacturing sector is faced with rather stringent conditions.

The problems are thus:

a. Low capacity utilization

b. High cost of foreign exchange

c. Lack of executive capacities

d. Instability in our policy

e. Inefficiency in country's economic system

1.2 AIMS AND OBJECTIVES OF THE STUDY

The aim of this study is sto examine the effect of cost control in the manufacturing firms. And these include:

a. To come out with realistic and feasible proposal within the enterprise could be eliminated.

b. This work will serve as part of my requirement for fulfilment of my requirement for the award of National Diploma in Accountancy.

c. To find out any inherent deficiency and to make recommendation for solving them.

d. To examine the production control system.

e. To evaluate the effectiveness of the control system.

1.3 SIGNIFICANCE OF THE STUDY

The growth of high inflation rate has persisted over the years now in the present high prices of produced goods, low profit, low savings and risks and costs of using money.

Those pose such intractable problems that the manufactures and plicy makers are forced to constantly review reconsider the technique adopted for solving the problem.

The study is significant in many ways:

a. Knowing the factor that influence it

b. This study will serve as a reference point to various enterpreneurs when confronted with serve as a reference point to various enterpreneurs when confrontd with costs control decision.

c. It will also add to the already existing works on this topic.

d. Cost or effect of the influence

e. Knowing the decree of influence.

f. How to control and manipulate these factors so as to stem the increase in price

1.4 SCOPE AND LIMITATION OF THE STUDY

This work has not been easy because the materials are scarce due to current nature of this kind of study involves extensive data collection and analysis.

Within the scope of this study, the research is with limitation. Finance, they say is the back-bone of any business venture. This work is not an exception, the present economic hardship has some limiting effects on the project. Time is another hindrance to the researcher as lecturers were compromised for his work.

Finally, this work was limited to only the effects of cost control in manufacturing companies-firms.

1.5 RESEARCH METHODOLOGY

The data on which this study is based were collected from two major sources?

Primary and secondary data. For the primary data, the researcher had to rely on questionnaire and oral interview. The questionnaire were administered to factoory employees and suppliers.

The necessary secondary source used were relevant textbooks, journals, periodicals, seminar papers, annual reports, academic and business publications, newspaper, articles and magazines.

1.6 ORGANIZATION OF THE STUDY

For the purpose of easy understanding of the study, the work is segmented into three chapters.

Chapter one is concerned with the introduction, background of the study, significance of the study, organization of the stduy, methodology and definition of terms.

Chapter two deals with review of some related literatures. While chapter three includes summary of findings, conclusion and recommendation.

1.7 DEFINITION OF TERMS

COST: this is the amount of expenditure (actual or norminal) incurred on or attributable to a specified thing or activity.

COST CONTROL: this involves the effort to keep the actual cost incurred in line with the predetermined cost and by the comparison of actual cost with these pre-determined cost to reveal unreasonable cost in order that steps may be taken to identify and if possible remove the responsible factors.

MANUFACTURING ORGANIZATION: these are those organizations, which combine men, materials and money in an effective and efficient manner with aim of producing goods.

PROBLEM: a matter of difficult settlement of solution; a question or puzzle propounded for solution.

REFERENCES

Westing J.H. Fine, I.V. Zenz and Gart J.: (1979) Purchasing management, material

in motion. 4^th edition New Delhi; Wiley Eastern ltd.

Lucy, T. (1989): costing and instruction manual.2^nd edition London D.P.

publicaiton.

Eze J.C. & Co (1998); principles of cost accounting. J.T.C publisher Enugu.

Wilson, R.M.S. (1983): Cost control handbook. 2^nd edition Grover pubicher coy

England.