ABSTRACT
This
project examines the impact of cost control systems in the manufacturing
industry, focusing on Mighty God Investment Company as a case study. The
primary objective is to investigate how an effective and efficient cost control
system can significantly reduce financial lapses within the enterprise. The
research aims to assess the administration of cost control during production,
compare actual and budgetary costs, analyze the costing system in the
production sector, evaluate costing inventories, and identify factors impeding
effective cost control while proposing improvements. Employing causal and
exploratory research designs, the study involves the entire cost control staff
and related departments at Mighty God Investment Company, selecting a sample of
20 out of 30 staff members for detailed analysis. Data were processed using
comparative percentage tables and chi-square statistical tools.
Key
findings reveal that the company lacked a specific cost control system,
resulting in frequent stock imbalances. Although previously decentralized, the
company has recently established a logistics department to centralize
purchasing. The analysis indicates that effective cost control can enhance the
firm’s turnover and positively influence staff attitudes towards asset
management. A significant 80% of respondents agreed that cost control impacts
staff behavior in asset utilization. The restructuring of the company has
introduced a proper cost control system, which has corrected inaccuracies in
financial records and reduced fraudulent activities, ultimately generating more
revenue.
In
conclusion, the absence of a robust cost control system previously led to
financial discrepancies and inefficiencies. However, recent restructuring has
highlighted the importance of cost control in fostering accurate financial
management and operational efficiency. Recommendations include the
establishment of a sound, business-specific cost control system and the
formulation of efficient cost control techniques to ensure thorough
accountability in each production department, thereby promoting profit
maximization and sustainable growth for Mighty God Investment Company.
TABLE OF CONTENTS
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
1.2 Statement of the Problem
1.3 Objectives of the Study
1.4 Research Hypothesis
1.5 Significance of the Study
1.6 Scope and Limitations of the
Study
1.7 Research Methodology
1.8 Definition of Term
1.9 Plan of the Study
CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
2.2 Fundamentals of Cost Control
2.3 Definition of Cost Control
2.4 Importance of Cost Control
2.5 Desirable Condition of a Costing System
2.6 Basic Costing Techniques.
2.7 Costs Behavior; the Compass for Cost
Direction.
2.8 Break Even Analysis as a Profitability
Management Tool.
2.9 Cost Management
2.10 Techniques of Cost Management.
2.11 Separate Cost Control Department; A Necessity
2.12 Summary
CHAPTER THREE
RESEARCH METHODOLOGY
3.0
Introduction
3.1
Research Design
3.2
The Study Population
3.3
Sample Design and Procedure
3.4
Sample Size Determination
3.5
Data Collection Instruments
3.6 Sources of Data
3.7 Procedures For Processing
Analysis of Selected Data
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
1.
2.
3.
4.
4.0
4.1 introduction
4.2 Presentation Of Data
Through Research Question
4.3
Summary
CHAPTER FIVE
SUMMARY CONCLUSION AND RECOMMENDATIONS
1.
2.
3.
4.
5.
5.0
5.1
Summary Of Finding
5.2
Conclusion
5.3
Recommendations
5.4
Area of Further Research.
APPENDIX: Questionnaire
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The competitive nature of
today’s business world coupled with the need for persistent cost reduction and
continuous profitability have made it imperative for an organization to be
aware of its cost components. This is to ensure that it products are made and
sold at least possible price and this is where cost control come into act as a
compass to the managers in their daily endeavors of achieving the corporate
objectives of the organization and those of the shareholders.
Cost control is the
practice of managing and or reducing business expenses. Cost control starts by
the business identifying what their costs are and evaluate whether those costs
are reasonable and affordable. The, if necessary, they can look for ways to cut
costs through method such as cutting back, moving to a less expensive plan or
changing service providers.
The analysis involves the
study of certain specialized cost concepts such as fixed and variable costs,
control cost, differential cost, replacement cost, sunk cost, inventorial cost
etc.
The concept of cost
control has to do with various means by which management ensures that their
cost element do not get out of hand.
According to Malomo
(1999), control in the management sense is the “process by which managers
ensure that resources are obtained and used effectively and efficiently in the
production or manufacturing of goods and services.
Thus, cost control or cost
minimization is something that must be going on at all times.
Buttressing this facts Drury
(1948), says for cost control to be of greatest utility “it must be in
continuous operation so that as waste and efficiency enters the picture, hat
are spotted it once before losses have had a chance to accumulate.” Cost
control system is really an indispensable tool for an organization to pursue it
cost minimization and control objectives and obtains the best fit within its
competitive business environment.
1.2 STATEMENT OF THE PROBLEM
For an effective and
efficient internal and cost control, the management of every production firm is
usually concerned with the setting up of rules and regulations including
policies which are comprehensive enough to cover or apply to all functional
areas of the organization which consists of cost reduction function carried out
by the generality of the employees on a day to day basis. Hence, for any
limited resources available to produce a higher output for the profit
maximization and to be able to compare their actual cost to the budgeted cost.
Therefore, viewed from the
above angle, one can see to be an obvious agreement between outlined management
movable asset physical cash, inventory salary payment, Banking services, other
assets and daily management routine. Related problems which face them are being
associated with the following shortcomings:
1.
The sources and application of fund mishandling
2.
Inefficient cost control system
3.
Management weakness or inefficiencies cost allocation to the
various sectors concerned
4.
poor motivation of employees
the above effect the profitability, growth and smooth running
of most production sectors and at the end of this research study the management
of any producing sector shall be able to know the effect of proper cost control
system in any field of their business focus.
1.3 OBJECTIVES OF THE STUDY
The objective of this research is to investigate the impact
which an effective and efficient cost control system could have in drastically
reducing lapses which could be costly to the enterprise if taken for granted.
The main objectives of the study are as follows:
1.
To know how effective cost control are being administered
during each production
2.
To determine the actual and budgetary cost control on every
product of each production
3.
To ascertain the costing system in the production sector
4.
To determine the costing inventories
5.
To identify some of the factors militating against effective
cost control system and make necessary suggestions for the improvement and
effective cost control system.
1.4 RESEARCH
HYPOTHESIS
The following three
hypotheses were tested in this study:
Let HO: Null hypotheses
HI: Alternative hypotheses
1.
HO: cost controlling information does not ensure cost
consciousness and profit mindedness.
2.
HO: the current cost reduction policies of Mighty God
investment are not very effective in enhancing the profitability of the
organization
3.
HO: separate cost controlling department/unit is not
desirable for cost management
HI: separate cost
controlling department/unit is desirable for effective management.
1.5 SIGNIFICANCE OF THE STUDY
It is obvious that this
research study is of great importance not only of Mighty God investment but
also to all production/manufacturing concerns in Nigeria because of the cost
control involved. The lack of education and general awareness undoubtedly could
be pointed out as one of the reasons for this unpleasant scenario in our
economy today. Hence, he study becomes inevitable as:
1. It will help the Nigerian
production sector to know the importance of cost reduction scheme and control
in their business
2. It will sensitize them on
how best cost control can be achieved
3. It will expose the
consequence of an enterprise without efficient and effective cost control
4. It will educate both the
management and staffs on the importance of cost control.
5. It would also correct
erroneous notion that the cost control system is not too vital in the profit
making process of any sector
1.6 SCOPE AND
LIMITATIONS OF THE STUDY
At this point it is very
necessary to define the scope of this study, especially what the study centers
around:
1. Mighty God investment
2. Only those areas of cost
control concerned with the cost management and cost minimization
3. Appraisal of the costing
policies of the organization under study with the aim of ascertaining its
efficiencies and effectiveness
1.7
DEFINITION OF TERMS
Cost control system like any other
course has it own peculiar terms. Some of the terms are as follows:
Cost
management:
this consist of those actions that are taken by managers to reduce costs, some
of which are privatized on the basis of information extracted from the cost
system. Drury (2000)
Cost
consciousness: this is continuously being aware of cost implication of any managerial
decisions or actions.
Cost of
inventories: these are the costs incurred in the process of obtaining or ordering
raw materials components or parts from suppliers
Competitive: these are goods that are
cheaper than similar goods
Profit-mindedness: this is the continual
focusing on profits as the only factor for the survival of a business in the
long run
Strategic
planning:
this is the process of setting long term survival policies and targets of an
organization
Fixed cost: this are cost items that
will always remain constant and unchanged regardless of the level of activities
Variable
cost: this
is the cost item that moves or varies in direct proportion with the level of
activities
1.8 PLAN OF THE STUDY
This research work has been planned
to cover Mighty God investment, chapter one is the introduction part that gives
insight for the reader and chapter two is literature review carried out.
The research is a case study of
Mighty God investment and it will be in chapter three that the data analysis,
data collection is chapter four while summary, conclusions and recommendations
is chapter five.
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