ABSTRACT
In this time of rising prices,
brewery like any other manufacturing company needs an efficient system of cost
control as an essential factor in reducing the cost system of production in
order to maximize profit. Due to inefficient cost control system some companies
just manage to break even or in most cases make substantial losses hence our
assessment of cost control in Nigeria manufacturing at Guinness. As a result of
this, our finding is to show the appropriate system of cost control which can
be used to minimize production system of cost and its effect under the
manufacturers condition. The entire study consist of five chapters, chapter one
introduced us to the study, highlighted the background, purpose of the study
and an insight into the historical background of Guinness Nigeria plc. Chapter
two is a relevant literature on cost while chapter three briefly discuss the
research method applied. A detail of data obtained in chapter four, chapter
five the last chapter, contains summary, conclusion and recommendation.
TABLE OF CONTENTS
Title Page - - - - - - i
Certification - - - - - - - - ii
Dedication - - - - - - - - iii
Acknowledgement - - - - - - iv
Table of contents - - - - - - v
Abstract - - - - - - - viii
CHAPTER
ONE: INTRODUCTION
1.1 Background to the Study - - - - 4
1.2 Statement of the Problem - - - - 5
1.3 Research Question - - - - - 6
1.4 Objective of the Study - - - - - 6
1.5 Statement of Hypothesis - - - - 7
1.6 Significant of the Study - - - - - 7
1.7 Scope of the Study - - - - - 8
1.8 Limitation of the study - - - - - - 8
1.9 Definition of terms - - - - - 8
CHAPTER
TWO: REVIEW OF RELATED LITERATURE
2.1 Meaning of Cost Accounting - - - - 11
2.2 The Concept of Cost Accounting - - - 11
2.3 Characteristics of cost accounting
information - 21
2.4 Analysis and classification of Cost - - - 23
2.5 Cost control and
performance Evaluation - - - 27
2.6 Direct and Indirect cost - - - - 28
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction - - - - - - 36
3.2 Population of the Study - - - - 36
3.3 Sample and Sampling size - - - - 37
3.4 Sources of Data - - - - - - 38
3.5 Method of data collection - - - - 39
3.6 Research Instrument - - - - 40
3.7 Method of data Analysis - - - 41
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.1 Data Presentation - - - - - 43
4.2 Data Analysis - - - - - - - 43
4.3 Hypothesis Testing - - - - - 50
CHAPTER FIVE: CONCLUSION AND RECOMMENDATION
5.1 Summary of Findings - - - - - 56
5.2 Conclusion - - - - - - 57
5.3 Recommendation - - - - - 58
Reference - - - - - - 59
Appendix A - - - - - - 61
Questionnaire - - - - - - 62
CHAPTER ONE
Introduction
Nigeria Commence and Industry are passing through
a period of economic recession, they are struggling to maintain satisfactory
earnings in a situation where cost are raising and some industrialist
complained that price increase are becoming more and more difficult to obtain
even at less proportionate degree with cost.
Foreign and domestic competition as well
government effort to prevent further inflation put serious resistance and
additional increase. In addition to those are government (both at the state and
federal levels) stabilization measure aim at re-strutting and improving the
economy and their attendant effect.
Some of those measures like the second tier foreign exchange market
(S.F.E.M) having had the effect of not only causing the increase price as a
result of increased cost of inputs they have ever gone further to multiply in
built imported inflation by the incremental exchange rate of the naira against
the convertible currency that are used in those importation market.
To maintain earnings or increase earning in the
face of those conditions, many companies are taking strong steps to control
cost if not reduce cost and eliminating waste and increase productivity.
Automation and improvement in technologies are helping to control and reduce
cost but are often insufficient.
The top managements of many companies a
consequence are putting pressure on their organization at every point to
reorganize the role of cost accounting jobs are being timed and standards set
in manufacturing department where timing and standard did not exist previously.
These procedures are also being made more detailed. They are tighter,
religiously adhered to and are not controlled more vigorously.
Economies are sought all through the organization
in this wise, the manufacturing companies are not left out. In order to endure
their survival and also to create more positive impacts on the economic growth
many method of cost control are being utilized. The purpose of this research
work therefore, is to examine critically the various roles/significant of cost
account information in the manufacturing industry in Nigeria, it study of
Guinness Nigeria plc. Benin City.
HISTORICAL BACKGROUND OF
GUINNESS NIGERIA PLC
Prior to the establishment of Guinness Nigeria
plc. Ikeja, Guinness stout was for
many years imported into Nigeria by a number of merchant houses (Companies) the
Guinness company conjunction with the United African Company (UAC) decided to
build a brewery of the cost of two millions and four hundred thousand naira
(2.4m) of Ikeja in 1961, this brewery was commissioned and started production
in 1962, there by marketing Ikeja (Nigeria) the third after Dubai and London
where Guinness in brewery.
The Guinness Company limited became a public
company in 1965 and was one of the companies to be quoted on the Lagos stock
exchange which share was offered. Nigeria acquired some share totaling 20% of
the equity of the company at the time in 1971 a decision was made by the
management to establish in Benin
City in 1974 at the cost of twelve million (N12 m) to brew the “Harp”
larger beer In 1976, a Guinness stout Brewery was built in Benin at the cost of
(N 30 million) approximately, this was in addition to one built in 1971 which
was producing “hap” large beer it was the brewery to build in Nigeria from the
scratch. The project was financed from the following sources.
•
Sale of 4,000,000 shares Nigeria participation increased from 40%.At
this time the degree was yet to be promulgated.
•
N10,000,000 1% for montages debenture 1960
•
N 6,000,000 second debenture 1978/91
•
N8.8million from internal reserve
As a consequent of ever growing demand, another
brewery was commissioned in 1983 for the brewery of harp larger it is sited in
Ogba in Lagos state. The business of the company is the conversion of raw
material mainly Malta Guinness.
Today, the company is with authorized capital of N96%
million total shareholder funds however is N 194,242,000 made up of paid up
capital of N96 million capital reserves of N 99.42 million.
Revenue reserve of 69.822m and turnover of about N 958.2m
(Source Annual Report and Account Guinness 1994)
1.1 BACKGROUND TO THE STUDY
According to Edeh (2010) cost accounting is
concerned with systematic analyses allocation of expenditure of a business in
such a way that it is possible to ascertain the cost of each job, contract or process
carried and reveals causes of increase or decrease in the profit shown by the
financial account or in the budget or other estimated of profit. These records
are maintained in ledger and other periodic or financial statement of the
organization.
Also Willsmore (1971) observed that not all
business organization understood the impact of cost accounting reporting and
information management of their business as a result, business managers over
the years failed because they lack information and control on their total
performances. This include the coordinating of all activities and their
direction toward the attainment of the overall objectives of the organization
the top management job is always policy formulation of this level, control is
conventionally exercised through short period.
Cost accounting information usually comes in
disguised form, the fact that some business organization cannot afford to hire
or employ such expert hand they trend to ignore cost accounting system in their
organization and as a result could not achieve the organization goal during the
accounting period of one year.
Whether the business organization is corporate, partnership or sole
proprietorship form of business, managers should be able to know the impact or
significance that cost reporting can have in the management of their
organization.
1.2 STATEMENT OF THE PROBLEM
An efficient system of costing is an essential
factor for commercial and industrial control under modern system may be
regarded as an important part in effort of any management to secure business
stability the organization of an undertaking has to be so controlled that the
desired volume of production is secured at the lowest of cost in relation to
the scheduled quality.
In any manufacturing concern like the one under
study, the role of cost form the principle part of total operational cost
therefore is the ability for management to effectively control this items
(production cost) will keep actual production cost in line with the budget or
realistic standard there by eliminating unnecessary and avoidable variance
between both.
In ability to do this could lead to business
inefficiency and failure. This study therefore is to investigate the cause and
problem which fall in the following present question
1.3 RESEARCH QUESTIONS
This study seeks to provide answers to the following questions:
•
Does cost accounting information have significant role on
manufacturing organization?
•
Does significant role of cost accounting information affect the
organization?
1.4 OBJECTIVES OF THE STUDY
This objective of this research geared towards finding solutions to
the impact of cost accounting information on manufacturing organization. Thus,
the specific objectives of this research are to:
•
Determine whether cost accounting information has significant role
•
Ascertain whether significance role of cost accounting information
affect the organization.
1.5 STATEMENT OF HYPOTHESIS
The following hypothesis will be formulated and
tested.
1.
HO: Cost accounting information
have no role in manufacturing organization.
Hi: Cost accounting information have role in manufacturing organization.
2.
HO: The significant role of cost
accounting information does not affect the organization.
Hi: The significant role of cost accounting information affects the
organization.
1.6 SIGNIFICANCE OF THE STUDY
No commence and industry can really survive the
threat of time without thorough examination of its cost.
Therefore for a manufacturing company whose
production cost constitute a major proportion of the total cost to service,
grow and pay back its shareholders by making reasonable profit, effective
efficient control of such cost by management becomes very vital.
Since no company can afford to expand its scarce
resources in areas in which it has no latitude to control. The need to study
the role of cost accounting cannot be over emphasized.
1.7 SCOPE OF THE STUDY
This study examined the role of costing with
respect operation cost control of Guinness Nigeria plc. Benin City Branch it is
a meaningful attempt at studying the cost elements and their control in
Guinness (Nig) limited.
It also examines method of accumulating overhead and apportioning same
amongst department and also, the subsequent absorption of the allocated
apportioned overheads by the cost units that make up production departments.
1.8 LIMITATIONS OF THE STUDY
The following factor limits the study:
•
Financial Constraint: The money needed for the
carrying out of this project is another constraint. As a student the researcher
is faced with completing demands.
•
Other Logical Problems: Other logical problems not
mentioned compelled the researcher to limit the scope of this point.
1.9 DEFINITION OF TERMS
Production Cost: The cost of the sequence of operations which begins with supplying
materials, labour and services and with primary making of the product.
Standard Cost: It predetermined cost which is calculated from management standards
of efficient operation and the relevant necessary expenditure.
Marginal Cost: The amount at any given volume of output by which aggregate costs are
charged if the volume of output is increased or decreased by one unit.
Fixed Cost: A cost which tends to be unaffected by variations in volume of output.
Variable Cost: A cost which tends to vary directly with volume of output.
Material Cost: The cost of commodities supplied to undertaking.
Cost Classification: The process of grouping cost according to their
common characteristics.
Cost Appropriation: The
allotment of proportion of items to cost unit.
Over Head Absorption: The allotment
of overhead to cost unit.
Cost Variance: The difference between a standard and the comparable actual cost
incurred during the period.
Total Cost Variance: The difference between the total standard cost
value of the output achieved and the total actual cost incurred.
Budget: A financial and/or quantitative statement prepared and approved prior
to a defined period of time at the policy to be pursued during that period for
the purpose attaining a given objective.
Current Budget: A budget which is established for use over a short period of time and
is related to current conditions.
Inventory Control: Inventory control is the service based on
controlling the amount of stock held in various forms within a business to meet
economically the demand placed upon that business.
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