TABLE OF CONTENTS
Table of contents
Background of the study
Statement of the problem
Objectives of the study
Significance of the study
Scope of the study
Scope and limitation of study
Definition of terms
Research methodology and design
Determination of sample size
PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA
Summary of finding, recommendation and conclusion
Summary of findings
BACKGROUND OF STUDY
Cost control is a vital instrument for the survival of any business organization. The aim of this work the impact of cost control in a Brewing Industry a case study of Nigeria Breweries Plc. 9th Mile Enugu metropolis is to x-ray the conceptual insight of cost control techniques and ascertain whether in practical situation those techniques in the literature are operational and also the effect it has on the organization.
In furtherance of these however, similarities and dissimilarities would be examined and observation made. The control of cost is very necessary to the successful operation of different business organization. Business entity is set up as an economic institution with profit making as a primary business objective. Achievement of profitability objectives is a concern of every business for no matter the argument for the pace of profitability in modern business it still remain the primary and the only measure of corporate efficiency and vehicle for survival in competitive are turbulent business environment.
To achieve this profitability objective, attempts are made by various business concerns to bring cost to its bearest minimum and the essence of this cost awareness has been further amplified by the current high cost of raw material are other production cost.
Since the introduction of austerity measure in 1982 as a result of declined countries foreign exchange earning, this gave rise to the high cost of raw material sourced outside the country. In line to maintain reasonable cost many industries resonated to finding means of sourcing raw material locally which is cheaper comparatively to foreign sourced. This drive most of these industries into agriculture in other to produce their own raw material. For instance, the malt which was used by brewing industries has such replaced by the use of maize, a result of research employed by these brewing industries.
STATEMENT OF PROBLEM
The control of cost in any organization is not an easy task, efforts are made to limited cost to the level which can be sustained by the organization.
It therefore become a truism to state that three exist a problem in an organization where the cost method in operation is either not relevant or is not effectively applied to. Business organization are facing some drawn down in profit as a result of tributary allocation of cost to products and cost centre. This has been rise to:
1. High product cost
2. high product price
3. low turnover rate
4. costing method as usually adopted by an organization
In order to generate adequate cost information which would be
useful to management in the area of planning decision making are control with the price aim of reducing cost while optimizing revenue.
OBJECTIVE OF STUDY
Every human activity must have an objective, the absence of which renders plans useless the purpose of this study is to determine how what the author has leant as theories is practicalise in real life situation relating to impact of cost control in Brewing Industry.
These are also some major objective of this work
· To ascertain costing method used in ascertaining the cost
· Finding out any inherent differences in its application and its impact in the organization.
· To evaluate the control systems as their effectiveness
· To ascertain costing techniques used the organization
Finally, it is hop that the research will be guide for future
decision making and serve as a bench mark for future research student in the filed of cool control.
SIGNIFICANCE OF STUDY
It remains an uncontroversial fact that any thing done for a specific purpose has it importance. This could be advantageous or disadvantageous. This significance of this research lies ithe fact that the author is now better armed to face such challenges squarely in future, should be find himself in an establishment that needs her services.
Again it enable any organization to know the cost control techniques and the result of the application of such techniques.
Lastly it also serve any interested researcher into cost control measure as a good background for insight into this study.
1. Ho: Lower cost per unit does not increase profit or turnover
Hi: Lower cost per unit increases profit or turnover
2. Ho: Cost control does not help in measuring managerial performance in an organization.
SCOPE AND LIMITATION OF STUDY
It would be pertinent at this point in time to say categorically and emphatically that this study would in the main be in exhaustive realizing the undisputable fact that the topic is wide, the write up has consequently been narrow to the most relevant areas.
This areas being the cost control technique and its impact in brewing industry. This paper consist of fine chapter. Chapter one is an introductory chapter, chapter two give an overview of the topic and chapter three is the research design and methodology while four is for data analysis and lastly is the chapter five where the author give his finding recommendation and conclusion.
Also certain limitation posed great deal of problems to the researcher and there problem include time availability, inadequate finance and restrictive nature of company’s policy to visitor on sensitive areas hindered and in-depth study of impact of cost control.
DEFINITION OF TERMS
COST CONTROL This involves all efforts to keep the actual cost incurred in line with the pre-determined cost, and by the comparision of actual cost with there predetermined costs to revel unreasonable cost in order that step may be taken to identify and if possible remove the responsible factor.
COST UNIT: A quantitative unit of product or service inrealtion to which cost are ascertain.
COST CENTRE: A location function or item of enquiring in respect of which cost may be ascertained and related to cost unit for control purpose. It is related to the unit where cost is accumulated.
MARGINAL COSTING: A costing principle whereby variable cost are charged to cost unit and fixed cost attributable to the relevant period is written of in full against the contribution for that period. It is amount of cost increased caused by unit increase in output.
Pandey (2003:371) it remain an uncontroversial fact that any ting done for a specific purpose has it important. This could be advantageous or disadvantageous. The significance of the cost control lies in the fact at better armed to face such challenges squarely in future.
WM Herper op cit (2000:284) in cost and management account volume, state some principles must always be borne in mind when engaged in costing. Cost should be related as closely as possible to it cause, a cost is not charged until it is incurred, the prudence convention should be ignored that is real cost are never charged to future period, profit appropriation are excluded from cost. Cost are management account and cost control following the principles must be borne in mind when engaged in costing, it should be related as closely as possible to it’s cause and not charged to future period, profit.
Drucker (1992:302) state that cost control is process of measuring and correcting actual performance to ensure that plans for implementing the chosen cause of action are carried out there can be no control without objective plans since there is predetermine and specify the desirable behaviour and set and set out the procedure that should be followed by member of the organization to ensure that the firm is operated desire manner.
Walker C.J (1999:86), used business organization to know in detail the cost involved in producing goods and service has given rise to the growth of cost accounting which involves accounting for cost for this to be done successfully some cost principle urge been developed in order to provide management with information required for planning control and decision-making. Element cost include material labour overhead expenses material cost include the costs of acquiring material to be used in production transportation and cost of storage material acquisition has three basic routine purchase routine receipt and inspection routine storage are issuance routine material can be purchase by using the follow procedures, requisition are place on the purchasing department by department of requiring the material, Enguiries sent to the supplier, salaries are received chalked are recorded, quotation obtained and order placed, invoices are received cheque and paid in carrying out the above procedure variety of forms and used and then are as follows. This is the form used to instruct the purchasing department to purchase specific material to be delined.
J. Balty (2002:251) cost consist of all cost whether material ways and expenses which can be easily regarded as direct various element of overhead could be classified as indirect labour, indirect material, and indirect expenses. However overhead is best suitably classified according to function production overhead, administration overhead, selling and distribution overhead. These are cost production which can not be traced as part of the product or which are too small in value to be covertly measured.
L.E. Heitgeris, Matulch (2001:285); since it is not always possible to ascertain the actual amount of overhead that would be incurred in a cool centre a given period, then the method is devised so that cost data can be gathered on time. The method is predetermined overhead absorption rate. Costing method is defined.
Lucey (2002:195); as of costing which designed to suit the way goods are product or manufactured on the way service are produced with intensively competitively condition in business circle, today it is doubtful whether a business organization of reasonable size can survive without a costing method that is sound in principle are not detective in operation . however, it should be realized that no two business that are therefore that each firm will have costing method has unique feature this however does not mean there an no recoquisable common feature in the same line of business.
J.Rigg’s (1998:37); costing control applicable when each product or jobs in significantly different essential requirement is that each step or the manufacturing operation. The main purpose of lost are to accumulate cost of each so that consumer can be charged a price that will recover the cost of the job and at a reasonable profit return and to provide an evaluation or work in program costing involves a sound system of production control compresses work documentation. Cost control also requires a well organized basis with clearly define cost centre good labour, analyzed appropriate overhead rate and a relevant material issue pricing system in costing. Cost sheet is employed for each cost and authorization of document are employed to cover all internal transfer and usage industries where costing can be found are road and building construction. It is used when the production consist of limited repetitive number of articles are manufacture in one batch it is appropriate where a company manufacture components in relative small quantity are requires by customer.
Owler L.W.D and brown (2004:86) cost control is another variable of cost and it is applicable in industries such a shop, building, road construction and so on the determination of profit are loss on each contract is the main objective of contract.
This is also the written method each employed fill in a time sheet as arrival and departure time by signing the time sheet can be daily or weekly. Costing is a form of an operating costing used where production follow a series of sequences sequential process. It is a costing method which measure the cost per unit of each process stage most process costing method have the following feature. There is accumulation of cost to clearly defined process cost centre. The product are produced simultaneously procedure are clearly defined for separation them into by product and joint product the total cost of each process is shared equally over the production process including partly complete units so management is concerned with actual cost. There will be normally abnormal loss as production moves form one process to another costing is applicable in industries such a brewing good manufacturing oil routine chemical processing and so on.
Hougren (2001:447); which by the very nature of the production can not be proceed separately and which have equal economic important in production two or more product may arise simultaneously and to which cost may have to be apparitional also there could be waste scraps in the process of production in any of the above situation there is need for appropriate ascertainment classification and analysis of cost in a that will be beneficial to management as a tool of decision making joint product can be dealt with in either of the following apportionate of a physical unit basis which involve the output relating to the joint product being measure in a common physical until the cost are then apportioned in relation to their output apportioned on a sale value basis which involves the cost being apportioned are the basis of scale value. This must be distinguishes from selling prices of the product. Cost can be allocated directly to cost unit or cost centre where the overhead is identified with the cost unit or cost centre. This is the division of overhead among cost centres on the basis of benefit receives there exist some bases on which overhead could be apportioned.
This is the process by which the overhead is absorbed the unit of production there are different types of rate used for the absorphoi overhead into cost unit. They included overhead is absorbed according to the number of unit produced so it is very easy to apply the formular.
Halmer G.A (2001:340) state cost control a questative statement prepared and approved prior to a define period of time of the purpose of attainably a given objective this a cost control is not merely as estimate of production but a plan of action therefore define as a mean of control in which the actual state of affairs in compared with that planned for is that appropriate action may been taken with regards to any deviation before is for late the main objective of cost control is to provide a detail plan of time co-ordinate all the activities of the organization in such a manner that the maximum investment of capital and to services as a means for detunity the responsibility for all deviation from plans as well as provide information or the basis of which necessary correction measures can be taken. The four basis cost treatment of by. Production sales regarded as other income or miscellaneous profit especially when the value of the product is very small-scale value could be deducted from the joint cost producing the main product and the by. Product the method is where product is treated as it is traceable and technically possible to treat it as such the decision to treat it as such a joint or by product depend on management attitude, however the following criterial could be used, pursued. The management can decide to follow a policy or diversification that is to produce as many goods as possible thereby selling as many goods as possible depending on the feasibility where product could be converted into a joint product observation carried out by Keller and Farrar in management accounting got profit control reveals that joint product are sole in one market that deferent channel of distribution are followed if management feel that detailed accounting system is needed they buy product may be attract or treated as a joint product are inter-versa. Generally cost control is an aspect of operation costing that is used where the cost is a unit of service.
It is employed in order to determine the cost of operating a service unit it is defined so that form of operating costing which applies where started service are provided.
Wald J. op cit. (2000:95); cost control depends on the nature of production costing techniques depend on the purpose for when management requires the information costing is a costing techniques that is very useful in decision making process. It is often cover variable costing and sometime inaccurately described as direct costing. Cost control techniques which classified cost into two categories, these which are fixed are the remainder the marginal cost so that the effect of change in volume of output can be evaluated in terms of cost contribution and possible profit.
Buyer and Homles (2000:443); it is a form used in placing quality and quantity of material at competitive prices. Order are place after enquires haves sent to supplier and quotation obtained orders are normally placed with those supplier who will be able to supply the material needed at the lowest price some copies purchase order form are prepared and the number to be prepared varies with each business and it necessary they are distributed as follows: copy is sent to the department or requiting the purchase requisition copy is sent to the goods, inward department where there is one or any other department responsible for the receiving inspecting goods ordered so that adequate preparation could be made for the receipt of the goods. Cost control consist of all cost whether material wages and expenses, which can not be easily regarded as direct the various element of overhead material also referred to as briefly described below to as indirect wage man be regarded as the cost of labour employed in the firm which is ancillary to production.
Moore and Jaedicke (1999:238); states that as a cost control which is designed to suit the way goods are produced or manufactured or the way that services are provided with intensively competitively condition. In business circle today it is doubtful whether a business organization of sound in principle and not detection in operation moreover it should be realized that no two business that are alike even in the same industry. It follow therefore, that each firm will have a costing methods has unique feature. This however does not means there are no recogniblle common feature in the same line of business costing is applicable when each product or job is significantly different or manufacture.
In different specification different or manufactured each step or the manufacturing operation. Costing control is another variable of cost and it is applicable in industries such as ship, building, road construction. The determination of profit and loss on each contract is the main objective of contract costing when a contract extend over a long period, there is always the problem of assessing a conservative estimate profit accrued to each fanatical year. The estimation of the profit earned in each financial year is necessary in order to avoid excessive fluctuation in the company insult from year to year. Costing is a form of operating costing used where production follow a series of sequences.
Ibid (2001:156); cost control is operation costing that is used when the cost is a unit of service it is employed in order to determined the cost of operating a service unit. It is defined as that form of operating costing which applies where standard service are provided either by undertaking or by a service cost centre within an under listing. The methods of costing is different from process costing when is another aspect of operating costing which applies where standard service cost centre within an undertaken. This method of cost control is different from process costing which is another aspect o operation. Costing which is another aspect of operation costing in that while service costing deal with service cost unit process costing deals with production cost centres. However organization often encounter difficulties in choosing the most appropriate cost unit since some service can be measured in different unit. Costing control is used when the production consist o limited repetitive and definite number of article are manufacture in one batch it is appropriate where a company manufacture component is relative small quantities are requires by customer. The procedure for costing batch are similar of costing jobs. The batch will be treated as a job during manufacturing are the cost and collected on completion the total batch cost will be divided by the number of goods produced to obtain the batch cost per unit. Cost control is another variation of job cost and it is applicable in industries.
Walker (2002:203); cost control determine of profit and loss on each contract is the main objective of contract costing when a contract extends over a long period there is always the problem of assessing a conservative estimate profit accrued to each financial year.
The estimate of the profit earned in each financial year is necessary in order to avoid excessive fluctuation in the company results from year to year before arriving at he profit for each fanatical year, however total estimated on the contract has be calculated. Cost control is a form of an operating costing used where production follow a series of sequences. It is a costing method which measures the cost per unit of each process stage most process costing method have the follow feature. There is accumulation of cist to clearly defined process cost centre, the product one process becomes the raw material of another process where product are produced becomes the raw material of another process where product are produce simultaneously procedures are clearly defined for separating them two by product and joint product the total cost of each process is shared equally over the production process including partly completed units so management is concerned with actual costs. There will be normal or abnormal loss as production moves form one process to another process. Costing is applicable in industries such a brewery food.
THE EFECT OF COST CONTROL IN NIGERIA BREWERIES
(A CASE STUDY OF NIGERAI BREWERIIES PLC. 9TH MILE, ENUGU METROPOLIS)