Strategic Cost Management And Performance Of Selected Manufacturing Firms In Lagos And Ogun States Nigeria

Rising cost of production has threatened the survival of manufacturing firms in Nigeria. These firms rely on the use of traditional approaches to managing costs most times. However, these approaches often failed to yield the desired results, especially in this contemporary time of intense competition and change in firms’ cost structure. This therefore makes it imperative for firms to implement costing strategies in order to remain competitive and profitable. Hence, this study examined the effect of strategic cost management on performance of selected manufacturing firms in Lagos and Ogun States. The objectives of this study were to: (i) examine the implementation of strategic cost management techniques by manufacturing firms; (ii) examine the influence of strategic cost management practices on accurate cost information; (iii) assess the impact of Activity–Based Costing (ABC), Activity– Based Management (ABM), Target Costing (TC) and Life Cycle Costing (LCC) practices on performance; (iv) examine the effect of customer value enhancement on performance; and (v) evaluate the impact of accountants’ competency on strategic cost management practices.rnrnSurvey research design was employed. The population of the study consisted of three hundred and eighty five respondents (385), comprising accountants and internal auditors in seventy seven (77) listed manufacturing firms having head offices or factories in Lagos and Ogun States. The sample of the study consisted of three hundred and twenty five (325) respondents in sixty five (65) manufacturing firms selected randomly from the population. Primary data were collected through questionnaire administration. Data analysis was done using both descriptive statistics and structural equation modeling (partial least squares version).rnrnrnThe findings of the study were that: rn(i) strategic cost management techniques are being implemented moderately in the sampled manufacturing firms (at a minimum average of 4.3 in 7 point scale); rnrn(ii) strategic cost management practices (activity–based costing, activity–based management and target costing) have positive effects on accurate cost information (β = 0.454, p < 0.01; β = 0.196, p < 0.05; β = 0.170, p < 0.10, respectively); rnrn(iii) ABC and ABM have positive effects on performance (β = 0.173; p < 0.10; β = 0.230, p < 0.05, respectively); while TC and LCC have insignificant effects on performance (β = 0.035; p > 0.10; β = 0.069, p > 0.10);rnrn(iv) customer value enhancement has positive effect on performance (β = 0.310, p < 0.01); andrnrn(v) accountants’ competency has positive impact on ABC, ABM and TC practices (β = 0.399, p < 0.01; β = 0.372, p < 0.01; β = 0.248, p < 0.05, respectively). rnrnThe study concluded that strategic cost management practices are relevant for performance improvement; accessing accurate cost information and enhancing customer value. The study recommended that manufacturing firms should implement strategic cost management practices to improve their performance, secure accurate cost information and enhance customer value. Manufacturing firms should also invest in the training of their accountants with a view to improving their competency which eventually will enhance ABC, ABM and TC implementation.

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