The Impact of Cost Control in the Manufacturing Industries

Abstract of The Impact of Cost Control in the Manufacturing Industries

This research work tried as much as possible to look into the impact of cost control in manufacturing industries. In pursuance of these objectives there will be head to highlight the followings: make detailed explanation of the methodology involved in the heading of the cost control in Innoson Nigeria limited. Chapter one of this project is based on the background of the study, statement of problem, objective of the study, the research questions, scope of the study in the manufacturing industry concern, it also deals with the significance of the study, limitations and definition of terms in the cost control system. Chapter two deals with the literature review where definition and meaning of cost control, control methods, needs for cost control, importance, factors leading to the need for cost control, benefits of cost control and management requirements for adequate control, modern development, types, merit, cost system and cost control as it affects Innoson Nigeria limited was being mentioned here. Chapter three deals with the research methodology like area of the study population, sample and sampling procedure method of data collection, the research, design and others. Chapter four based on data analysis and interpretation of the study. It also deals with the findings that are concern mainly with that method adopted. Chapter five deals with summary conclusion and recommendation of the study. It recommended that, if more accurate cost control records are kept the organization would achieve more than their present value of their production.

Chapter One of The Impact of Cost Control in the Manufacturing Industries

 INTRODUCTION

BACKGROUND OF THE STUDY

Management as a discipline is becoming more dynamic in nature as a result of complexities that surrounds our business world. Numerous routine planning and control activities formally performed by clerk now been developed into sophisticated functions with far reading effect on cooperate objective and profits. Cost control, a vital element of cost management is one of such functions.

According to Adetayo (1998), cost can be defined as the monetary measures of value consumed acquired. It is the amount of expenditure (actual or national) incurred on or attributable to a specific thing or activity.

(Eddy, 1991), defined cost as the amount of goods or the provision of a service. In other words it means the amount of expenditures incurred on a particular project or venture over a given period of time. It could be fixed cost, variable cost and opportunity cost etc.

In addition, objective of cost analysis is the process of discovering the purpose in which factors of production has been used for concise information in management decision. However, coast control is defined as a profit maximized monetary and a central criterion of cost. This means that a cost of controlling must be related to decision of importance for the success of operation as a whole, within the scope of planning and controlling process.

STATEMENT OF HE PROBLEM

Cost control problems are not perculiar to manufacturing industries only but also extended to armed forces, government parastalat and other payee agencies.

The following are the cost control problems in manufacturing industries:

(i)         The divisible and manner of control in the company.

(ii)       The company is facing the problem of setting budget and standard cost.

(iii)     The problem of comparing the total accurate standard or variance.

OBJECTIVES OF THE STUDY

The main purpose of this study is to make official review and demonstration cost control in a manufacturing organization.

Costing system differs from one industry to another

In pursuance of the objective there is a need to highlight the following aids:

i)            Identify the cost Nigeria limited.

ii)          Determine the importance of cost control in a manufacturing concern, which is Innoson Nig. Ltd.

iii)        Make detailed explanation of Innoson Nigeria limited.

iv)        Assess the effectiveness of cost control in Innoson Nigeria limited (cost and budget).

v)          Determine the unit cost of production cost

RESEARCH QUESTIONS

These are the questions which the researcher used when writing a project or making a research in a project work:

i.            What is the relationship between cost control and profitability of Innoson Nig. Ltd?

ii.           Does budget help to ensure effective cost control and profit growth in Innoson Nig. Ltd?

iii.         What are the requirements for ensuring effective cost control system in Innoson Nig. Ltd?

iv.         To what extent does cost control affect the system of production in Innoson Nig. Ltd?

SIGNIFICANCE OF THE STUDY

This study will be beneficial to both large and small scale industries in the area of adequate budgeting. There will be a mutual agreed budgets or standards where appropriate. This will aid adequate decision making for these large and small scale industries.

The study will also be beneficial to both the state and federal Government in the area of controlling the cost of goods and services in the manufacturing industries. There would be recommendations at the end of this study in order to aid the Government on how to control the cost of goods and services.

This study will also be beneficial to the students on the area of their academics. The study will also help other students on how to control the cost of goods and services if eventually they find themselves in any industry.

SCOPE   OF THE STUDY

One of the primary responsibilities of management is to set up and implement cost control in industries. The project work will examine critically the cost control system and factory management used in the industries classification of cost reduction and standard costing. However, the work will not be studied in departments because of some financial constraints and problem of planning.

 LIMITATION OF THE STUDY

i.            Need for coast control.

ii.           Definition and meaning of cost control.

iii.         Factors leading to need for cost control.

iv.         Benefits of cost control and management.

v.          Requirement for adequate controls.

vi.         Modern development.

vii.       Types of cost control.

viii.     Merits of cost control.

ix.         Cost system and cost control.

x.          Cost control techniques.

xi.         Cost control as its affects in Innoson Limited materials.

HISTORICAL BACKGROUND OF INNOSON

Innoson Nigerian limited is an indigenous bluechip Company, which was incorporated in 1982, by (Chief Innocent Chukwuma).

Innoson Nig. Ltd. Engaged extensively in the importation, manufacturing, assembling, and marketing of automotive components, accessories, motorcycles, motorcycle spare parts,  and tyres and also other plastic products at Nkwo Nnewi, Anambra state.

However, Being the first indigenous company after Leventis and bouder enterprises to event Motorcycle into Nigeria was an eye-opener  and a strong signal that Innoson was destined to be great. In 1994, Innoson embarked on a mission that gave Nigerian economy a boost.

Chief Innocent Chukwuma, a man of vision divided in with two business ideas: “Invention and Innovation” simply to create a unique idea that would usher in a breakthrough in motorcycle spare parts while later was to make positive change in efficiency, productivity and quality.

The first Nigerian whose invention of having 240 units of complete Knock down (CKD) motorcycles instead of normal 40 units of built up machines in a container thereby crashing the prevailing market price down from N100,000 to N50,000.

Innoson brand has tremendously contributed successfully towards the transfer of Chinese technology to Nigeria. The evidence on the ground proved that on record, the Innoson group boosts of over 7,000 Indigenous workers of divers disciplines scattered in various subsidiaries nation wide.

From the above organization chart, the managing director is responsible to the board of directors, four departmental heads are directly responsible to the managing directors. The departments are administration department (headed by AGM. marketing), the account/finance department (headed by Senior accountant) and the production department. (headed by the production director).

It must be emphasized that the production director has more authority than the other three department heads. Infact, the occupies the instated  position of the deputy managing director.

The managing director is the chief executive. He sees to the overall achievement of the programmed enunciated by the board of directors in collaboration with the management and non management staff of the company.

The production department headed by the production directors takes care of production services, technical and engineering service as well as quality control.

The account finance department headed by the senior accountant is responsible by the finance functions like preparation of periodic financial statement, provision of funds and its effective utilization.

The marketing department, headed by the AGM (marketing) is responsible for marketing and sales of all the company’s products.

Administration department, (Headed by the AGM Admin) is responsible for personal matters (recommitment, staff training, staff discipline and staff welfare) and other administration function like: public relations, and effective implementation of company’s objectives.

DEFINITION OF TERMS

i.    Cost: this is defined as the total amount incurred for the purpose of producing goods or rendering services.

ii.Cost unit: this is a quantitative unit of products or services in relation to which cost are ascertained, related or expressed.

iii.             Cost control: this is management by measurement and covers both routine comparism of performance against standard and corrective and exploitive action.

iv.              Work measurement: it is the best of identifying the specific assignment and allocation of maximum period for its execution.

v.  Cost Reduction: this is a process whereby permanent savings are made within any reduction in quantity and or usefulness of the production.

vi.              Cost System: this deals with managerial element task which makes the determination of the cost unit.

vii.           Marginal Costing: this is costing technique whereby fixed and variable costs are differentiated. Only variable cost are charged to cost units and fixed costs are written off in full each period.