TABLE
OF CONTENTS
CHAPTER
ONE
1.1
Introduction
1.2
Statement of the research problem
1.3
Objective of the study
1.4
Statement of Hypothesis
1.5
Research Methodology
1.6
Scope and limitation of the study
1.7
Significance of the study
1.8
Definition of terms
CHAPTER
TWO
1
What is control?
2
Purpose of control
3
Division of control
4
Basic Element of control
5
Cost control
6
Cost
7
Cost and expense
8
Purpose of cost studies
9
Cost center
10
Cost unit
11
Element and classification
12
Other cost of classification
13
Cost control techniques
CHAPTER THREE
3.0 Research Design
1
Research Instrument
2
Method of data collection
CHAPTER FOUR
1
Research hypothesis
2
Research of findings
3
Research of data analysis
CHAPTER FIVE
5.1 Summary
5.2
Recommendation
5.3 Conclusion
Reference
Appendix
CHAPTER ONE
1.
INTRODUCTION
A
business can be defined as the sum total of those activities that have their
main purpose of creations, maintenance and extension of a concern, with
continuous to exist because it earns profit or than benefits.
Business
is set-up to achieve certain objectives, these objectives may range from
maximum of the organizer, wealth, rendering of certain essential service to the
community, capturing of larger share of market for it product or services to
maximization of profit or minimization of cost.
In
achieving these goals, resources inform of human and material have to be employed these resources employed are
measured in quantitative term and then translate them into what is know as
cost.
A
rational businessman has in his mind apart from other aim in his business
undertaking, the maximization of profit and minimization of cost. But the
business operation environment is dynamic and complex. Some factor, internal
and external, may affect the cash flows position of the firm and posses a
threat to the going concern intension of the organization of the business.
1.2 STATEMENT OF THE RESEARCH PROBLEM
The major
problem of this study is to find out the effect of cost and reduction of
maximization of cost. Undoubtedly, it will lead to decline in operating profit
or low return on invested capital and gradually culminate into cash flows or
liquidity problems.
A continuous
high operational cost with less revenue will have adverse effect on the break
even position of an organization.
In view of the
above, there will be need to put in place an effective operational and control
strategies to overhaul and revamp the operational performance of the business
so as to have stable and stand financial
stand.
Although,
strategies is never set where a business has no problem of any form, but it may
be set to improve the operational standard of a business enterprise.
There are many
strategies that can put in place to solve business problem. Among the
strategies for solving business economic problem are the cost control and cost
reduction is used to achieve the corporate objectives.
More so, the
cost control techniques have the broad objective of curtaining cost within a
predetermined target but cost reduction is an active and dynamic concept that
attempt to extract more from the factor of introduction without loss of
effectiveness. It also aims at reducing costs from accepted standard and at the
same time maintaining the effectiveness of the product or services. Strategies
in business organization.
Also, the
problem of the cost reduction in economic of Nigeria business organization and
the effort made in solving economic problem of the cost reduction in Nigeria
business organization.
However, the
fulfillment of this intension in totality is very subjective and unrealistic as
a result of inevitable environmental factor which have direct or in direct
impact on the business.
The
environmental to have effects on the cost structure of organization, they are
determinant of the operational cost of activities or service being carried out
by a business enterprise as they influence more or most significantly the
management policies.
For example,
taxation, which is one of the government fiscal policies in the annual budget,
will in no doubt, have effect on the operational cost of a company. This is one
of the operating environmental factors and it is uncontrollable by the
management of a business.
More so, the
organization and operational policies of a company will have favourable or
adverse effect on the cost structure of such organization.
Therefore, an
incessant increase in the operational cost will negate the aim
However, the
success of thus strategy will depends on the style of planning the business
uses. The inability of a company to encourage “GAOL CONGRUENCE” is one of the
associative problems militating against the successful employment of these
schemes.
In attempt for
an organization to achieve it’s goal for satisfaction of individuals in the
firm must be created. The achievement of goal congruence requires consideration
by the firm, a broad range of human need in additional to those that can be
satisfied by economic rewards.
Where the above
cannot be achieved, the effects of cost control and cost reduction scheme might
not augur well for the business, therefore, cost control and reduction strategy
must be meticulous used and implemented on achieving the desired objective of
the schemes.
The techniques
involves the strategies shall be fully considered in the subsequent chapter.
1.3 OBJECTIVE OF THE STUDY
The
purpose of the research is to find out what are the effect of the cost control
and cost reduction strategies on the overall performance of a firm. It will
reveal the short-coming in these strategies for solving business economic
problems.
The
research will also attempt to define and explain the meaning of cost control
and cost reductions, the technique involves as well as the different in their
applications.
However,
the result of the research will serve as a single guide to policy makers in the
business organization in taking decision as regard to thus topic.
1.4 STATEMENT OF HYPOTHESIS
Cost
control and cost reduction strategies do not lead to achievement of corporation
objectives and cannot be used to solve business economic problems.
Hi: Cost control and reduction
strategies can be used to achieve corporate objective and also used to solve
business economic problems.
Hi: Cannot be used.
1.5 RESEARCH METHODOLOGY
In the course of
the research, both primary and secondary data will be used, some companies will
be used as a case study in the research project.
The secondary
data will be got from annual report, audited account of the various companies
and other various publications relevant to the study.
1.6 SCOPE AND LIMITATION OF THE STUDY
Due to time and
financial constraint only few companies will be used for the research and
questionnaires will be serving on the companies. The companies will be selected
warmly from the different sector of economy.
The scopes of
cost reduction embrace activities of the entire company, from production to
marketing and at all level with the organization from the operation to top
levels. Cost reduction effort may include the following
a)
MATERIAL
COST:
I.
Quantity discount or cash discount for
early payment to supplier may be negotiated at favorable discount rates.
II.
Inventory control policy might need
improvement
III.
Value analysis may be carried out
IV.
Procedures for reducing material wastage
in production should be instituted.
b)
LABOUR
COST
I.
Labour efficiency may be improved by
work study.
II.
Unit labour cost and unit overhead
cost may be reduced by having production efficiency rewarding plan with the
employees
c)
FINANCIAL
COSTS
I.
Where there is the desire to allow for
discount, it should be done on a regular basis.
II.
Bank overdraft expense may be better
reduced by effective cash monitoring efforts.
d)
RATIONALIZATION
MEASURES
I.
As a company expands in activities,
there may be duplication of effort in the different face of it operation.
However, this duplication can be removed by ensuring that resources are
concentrated in the firm and this is referred to rationalization effort, which
is aimed at cost reduction that brings about efficiency at the workplace.
1.7 SIGNIFICANCE OF THE STUDY
At
the end of the research, the effect of excessiveness in the use of cost control
and cost reduction strategies in an operation will become clearer.
The
management will always take cogitation of other option in evaluating solution
to business economic problems.
Also
the problem, which can warrant the use of the two strategies, will be discussed
and alternative strategies which management can adopt in solving the business
economic problems will be taken in consideration.
1.7 DEFINITION OF TERMS
I.
Undue Expenses: Undue expenses can be
removed without having to compromise the quality of this term of production or
unit of services provided. Consumers can only appreciate buying goods of better
quality. Nonetheless, a lowering of the standard may ensure the reduction of
cost but at the expense of the quality of goods.
II.
Management Inconsistency: Cost reduction
programme require the support and commitment of the top management and this has
to be on a regular and consistent basis in order to avoid complacency not
minding whether the business climate is harsh or friendly.
III.
Resistance to change by employee:
Employee may want to react to change negatively as a result of past belief on
norms, this can be addressed by ensuring that existing system or work
environment situations are constantly reviewed and friendly employee are
involved at every stage in order to gain their confidence and support with
this, negative will be eliminated and cost reduced
IV.
Faultless system: A faultless system may
be a desired one but effort should be made to ensure that it is not over blown
so that unnecessary controls are removed.
V.
Avoidance of elaborated procedures:
Elaborate procedures of allowed in a company may bring about costly operation
at the expenses of ensuring that employee capabilities are recognized which
could lower cost.
VI.
Creative Ideas: Since issue can be
approached from different ways, ideas and contribution from everyone involved
in cost reduction programme must be allowed for in order to eliminate wastes.
Creative ideas can be enhanced by ensuring that employees are given good
incentive to work and the work environment must be friendly so that any scheme
put in place can be successful.
VII.
Areas of cost reduction: For cost
reduction activities to be meaningful, the sources for incurring these cost
such as finance, marketing, production, human resources. Engineering,
maintenance, etc need to be considered in terms of the material, labour and
overhead costs involved in the area mentioned. There is need for using an
integrated approach whereby cost is not considered in isolation, but their
inter-relatedness is given some consideration. The manager is, therefore,
expected to exchange ideas that will allow for goal congruence to be attained.
VIII.
Maintaining cost reduction: Reduction
can be sustained or maintained by ensuring that there is consistent control of
costs in a place with the aid of budgetary control techniques.
IX.
Communication: Information to employee
must be such that they are timely relevant, focused and less costly.
Information will be valued, where employees are convinced that their future is
guaranteed and prospect can be ascertained at the same time. Good and equitable
personnel manual must also be in place.
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