ABSTRACT
An appraisal of cost reduction and control in manufacturing firms in Nigeria (A case study of some selected quoted companies in Enugu State) cost reduction is the process of cutting or getting cost reduced through reduction in labour, materials and overlead elements without any loss or effectiveness. Cost control implies the comparison of actual cost with an early stage by the management. The main purposes of this research is to examine the need for reasonable control and reduction over cost so as to attain the necessary business losses and eventful failures in manufacturing firms in Nigeria. During the study, data were selected using random sampling the primary data collected were through questionnaires but were presented and analysed using tables and percentages. Similarly the completed and returned questionnaires were analyzed and some information extracted from it. The major findings are;
That a considerable number of manufacturing firms in Nigeria have trained senior management level who have no good ideal of proper cost control schemes in their organization. That the responsibility account practice in our manufacturing companies in Nigeria is not adequate and thus effective cost reduction and control remains elusive in the organization.
CHAPTER ONE
1.0 INTRODUCTION
1.1 Background of the
It has been noted that all manufacturing companies are established for making profit through the use of adequate strong and efficient cost control and reduction process.
Cost is attributed to an activity or service costing system used in one firm may differ from one firm to another but the main purpose of the system is to;
- Determine the unit cost of production
- To minimize wastage
iii. To allocate the resources (i.e material labour and overhead)
- To measure the effectiveness of the cost reduction and other cost control measures.
Cost reduction is a concept which has the aim of reducing cost from a previously accepted standard and of the same time keeping with the effectiveness or performance of the product or which attempts to exact more from the factor production without a loss 0f effectiveness.
Batty (2007: 372) has said that if a company is experiencing difficulties cost reduction may be the only answer. He also contended that cost reduction is compositive approach to improvement of efficiency and can be viewed as elimination of waste speeding up operations, increasing productivities or otherwise finding methods of reduce unit cost.
According to Batty (2007:371) cost control implies the comparison of actual and standard cost and then taking action on any variances which have risen. He also added that for a system to achieve desired objectives there is use for a business may have no difficulty whatsoever in achieving standard set many years ago, but this is not true control essential techniques of cost control are budgeting control, standard costing techniques which have the broad objectives of containing targets.
In recent times, many companies have embraced these schemes as a way of meeting up their organizational objectives and stay in business. Budgets and standards are not tight and more detained. Offices are being rationalized and restructured to minimized cost, scraps are given a more restricted definition and more productive ways of disposing them are considered personnel now the watchword. Companies therefore implement these with full recognition and support cost reaction and control benefits derivable from them
1.2 Statement of the problem
- In a bid for all manufacturing firms to meet up their primary objectives. It must pay particular attention to the control and reduction of its cost.
- This research work is to highlight the need for reasonable control and reduction over cost so as to attain necessary business losses and eventual failure many companies are faced with the problems of how to embark on cost reduction and control schemes and the effectiveness of such schemes.
iii. There is a problem of ineffectiveness utilization of resources, which has tremendous effect on our companies and the entire Nigeria economy.
- Some companies adopt cost reduction and control schemes without continuously knowing that, there are benefits to be derived there form.
This study aims to address these issues.
1.3 The objective of the study
The main objective of this study is to appraise cost reduction and control in a manufacturing industry in Nigeria.
Infact, there are many write ups in the area of cost reduction and control, the works were mostly directed to identifying strategies used or adopted by manufacturing companies.
- For the purpose of this study, emphasis should be based on a more promising scheme in Nigeria manufacturing companies that will enable them embrace the positive of cost reduction and control.
- It also intend to find a system that will enable them to access their actual performance, the rate of variance from standard and an effective corrective measure to form an over all system.
1.4 Research question
For the purpose of this study, the following questions are considered relevant and emphasis will be based on how best to find a suitable answer and solution to the problems.
- Does the Nigeria manufacturing firms have trained senior management personnel who are fully aware of the cost reduction and control schemes?
- Will adequate cost control schemes being a necessary impact on cost reduction or vice versa.
- Does responsibility accounting for cost incurrence have positive impact on cost reduction and control?
- Does efficient motivation on the part of the management and subordinate improve the firms performance towards their goal achievement?
1.5 Significance of the study
The research work has been motivated by the continous need by the management of companies to find out why most of manufacturing firm have continued to face project squeeze deposit in the implementation of some cost reduction and control schemes. This idea has been supported by individuals on control and reduction of cost process.
Greater (2006:111) said that, cost must be out, cost must be reduced and controlled, and profitability must be improved. There are the cries of the of manager chosing through the streets of industry and commerce.
Infact, crying is not an enough measure what is of most important is understanding the principles of cost control of which cost reduction is an ample aspect.
Cost reduction and cost control has also been so a vital function of the business managers, whether the cost dated to the current period expenses or to assects acquisition that will affect future accounting period.
It is helped, therefore in this work to assist our manufacturing firms to establish effective cost reduction and control schemes.
1.6 Scope of the study
Based on the fact that research topic in questionnaire cost reduction and control in manufacturing in Nigeria in an all embracing topic. More attention will be focused on some selected quoted firm in Enugu State.
The study is hampered by constraints and limited financial resources and these factor may compete the researcher to focus on the companies within the capital territory of Enugu State.
More again the study will be based on the formal cost reduction and control schemes in practice some accounting financial data are not easily disclose by firms to outsides, the researcher needs tremendous effort to convince the organizations involved that the exercise is purely for academic purpose and oubtedly this will prolong the period of job.
Finally, the researcher needs enough time and resources for personal interviews, questionnaires, administration and data collection from text book and journals.
1.7 Definition of the study
Cost; This is the amount of expenditure (actual or rational) incurred on, or attributable to a given thing. cost is the amount of money, time and labour etc. Required for the production or service or product (Egbuonu 2012).
controllable and non controllable cost
A controllable cost is a cost they may be directly regulated at a given level of managerial authority, either in the short time or in the long run.
A non controllable cost is that cost that cannot be directly regulated at a given level of managerial authority at least in the short run.
Cost service centre: A location, person or item of equiped or group of these for which cost may be ascertained and used for the purpose of cost control.
Cost reduction: This is the process of bringing down expenditure levels and spending less than before without reducing the quality of the products of service. It is a process of getting cost reduced through reduction in labour, material and overhead without any loss of effectiveness.
Cost control: This is the system in which management do some comparison on actual costs with predetermined standards so as to effect corectiveness at an early stage.
Cost Unit: Is a unit of quantity of product, service or time (or a combination of these) in relation to which costs may be ascertained or expressed e.g soap, a ticket etc.
Direct material: These are all material which can be measured and change directly to be identified which allocated to cost units.
Profit center: This is profit which can be identified with and allocated to cost centres of unit.
Direct expenses: These includes expenditure other than direct materials or direct labour that are superficially measured for a particular product or process they are changed directly to the particular cost centre as part of the prime cost.
Over head: This may be identified as indirect material, indirect labour and expenses including services and expenses including services and cannot conveniently be change direct to a specific cost units.
Standard cost; This may be defined as a pre-determined unit cost for the production of units of product under a specified working condition. It is a forecast estimate of cost to produce a single unit of product. Standard cost is usually compared with the actual cost and the difference between the two is termed variance.
Responsibility accounting: This is term used to describe decentralization of authority with performance of the decentralized units measured in terms of accounting results.
Quoted firms: These are firms that issue share or buy securities through the stock exchange commission this market is called the stock exchange market.
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