Production Cost Control in a Manufacturing Organization

Chapter One of Production Cost Control in a Manufacturing Organization
INTRODUCTION

BACKGROUND OF STUDY

The purpose of this research is a modest of attempt to verify the indiscriminate increase in the prices of commodities produced by manufacturing organization in this part of the country which has attracted the attention of many citizens, especially those who know the implications of this continuous rise continuous rise in prices on the people and on the nation’s economy.

This rapid increase in price of manufactured goods can be attributed to cost of production of goods and it is for this reason that the need for the control arises. Moreover, in compliance with the current drive towards structural Adjustment programme (SAP), these organizations are now caught up in the need to control their production cost.

This research paper will, therefore, attempt to give a comprehensive account of the control of costs in the field of production with particular emphasis on manufacturing organizations.

The feature of every organizations the pursuit of a goal and this goal or objective exists in different dimensions.

It is evident, therefore that every manufacturing organization, whether sole, partnership, corporation, among others, must have an objective and the primary objective of these organization is to maximize profit. Any other objective such as social service is purely secondary and generally dependent n profit.

Profit is the excess of total income over total cost during a specific period of time. It follows therefore, that for organizations to make profit, they must control over the cost of their productions and services.

Manufacturing is the transformation of materials into finished goods through the use of labour and factory facilities. It is clear that currently, the price of materials are so exorbitant to the extent that manufacturing companies are in a serious profit squeeze. They are struggling to maintain satisfactory earnings in a situation where costs are rising but some industrialist contend that profit increases are becoming more difficult to obtain ever at less proportionate degree to costs. Foreign and domestic competition as well as governmental efforts to prevent further inflation put serious restraints on additional increases. In addition to these, are governmental, (both or state and federal levels, stabilization measures aimed at re-structuring and improving the economy, and their attendant cost effect. Some of these measures like the second tier foreign exchange Market (SFEM)and structural adjustment programme have had the effects of not only causing increased prices as a result of increased cost of inputs, but have gone further to multiply in –built imported inflation by the incremental exchange rate of he Naira against the convertible currencies that are used in importation.