THE EFFECT OF COST CONTROL IN THE PROFITABILITY OF A BUSINESS ORGANISATION (A Case Study of Nigeria Bottling Company, Ilorin Plant)
TABLE OF CONTENT
Table of contents
CHAPTER ONE: INTRODUCTION
1.1 Background of Study
1.2 Statement of the Research Problem
1.3 Objective of the Study
1.4 Significance of the Study
1.5 Research Question
1.6 Scope of the Study
1.7 Limitation of the Study
1.8 Organization and Plan of the Study
1.9 Definition of the Key Terms
CHAPTER TWO: LITERATURE REVIEW
2.2 Cost Control Techniques
2.3 Cost Reduction Techniques
2.4 Effective Cost Control
2.5 Appraisal of Literature Review
CHAPTER THREE: RESEARCH METHODOLOGY AND DATA ANALYSIS PROCEDURE
3.1 Method of Data Collection
3.2 Population and Sample Size
3.3 Sampling Technique
3.4 Method of Data Analysis
CHAPTER FOUR: DATA PRESENTATION AND DATA ANALYSIS
4.1 History of Nigeria Bottling Company Plc
4.2 Data Presentation
4.3 Data Analysis
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION
1.1 BACKGROUND OF THE STUDY
One of the means of measuring the performance of an organization’s management is its efficiency. Efficiency reliable to the optimum utilization of inputs to derive the best achievable outputs.
An efficient manager executes his responsibilities with the last resources and maximum output to accomplish the organizational goals.
An important goal of a profit oriented organizational is to operate at a profit. However, if how effort to generate maximum revenue is not cost efficient, it will only be more difficult to achieve the goals. As strategies are employed to maximum returns on one hand, it is of equal importance for the management to institute conscious and methodical programmes that would assist in controlling and reducing the resources input in order that the revenue will not be totally consumed by astromical expenses.
We thus discussed the two techniques that could assist management to maximize cost namely: Cost control and Cost reduction techniques. For the purpose of this study, we shall call then cost management techniques (CMS).
We viewed cost control to be an application of costing to enable management to compare actual cost with planned cost and to take any necessary corrective action before it is too late.
Before any control can be affected, standard or target of performance must be set against with actual cost can be measured, through this method inefficiency will be revealed.
Cost control can also be viewed to be an exercise in good house keeping that is avoiding a wasteful use of valuable resources and encouraging efficiency and cost consciousness.
In contrast, coat are too high, through cost control might be good cost.
Cost reduction, therefore is a planned and positive approach to reduce expenditure. These cost management techniques cost reduction.
Therefore is a good planned and positive approach to reduce expenditure.
These cost management techniques (C.M.T) could be utilities extensive by profit oriented organizations producing goods and service, provided that the economic and political climate is stable for growth.
1.2 STATEMENT OF THE RESEARCH PROBLEM
This topic for this project is cost control and reduction techniques. Due to the lack of enough time, the research work is average. In the case, the various research problem formulated are in question forms.
i. What is the historical background of cost control and reduction techniques?
ii. What are the reasons for recent cost control and reduction
iii. Does the recent cost control and reduction have any prospect for kwara property development corporation (KWPC)?
iv. What are the likely problem facing cost control and reduction directions to KWPC?
1.3 OBJECTIVE OF THE STUDY
The research objectives of the study therefore are to:
i. Identify, if any cost management techniques currently employed in property Development Corporation.
ii. Apply cost management techniques to the area of interest.
iii. Determine the optimal level of construction cost Nigeria
iv. Examine the effect of constitution. Cost information cost management techniques C.M.T
v. Give an overview of constitution cost factors in Nigeria.
vi. Evaluate the effects of delayed payment on the construction study
1.4 SIGNIFICANCE OF THE STUDY
The study will shed more light on benefit to the professionals like architects, quantity surveyors and accountants. It will enlighten and bring about improvements.
The study will enlighten so many institutions to improve and not close town because this is an era of sky rocketing prices and inputs and unlike in the past, may commercial organizations and finance houses have closed down, below acceptable capacities due to high cost of inputs.
To survive therefore, it is not enough to deal with revenue aspect alone but also to keep costs an expense as minimal as possible.
The study will also give us more insight on invaluable assistance of the research work to NIGERIA BOTTLING COMPANY and other commercial organization involved in construction work. Human wants are unlimited and resources available are both disproportionately scare and also have alternative and competing uses. The situation is aggravated for a corporate body whose native now depends on the unstable and highly inflationary Nigeria economy to compute with this complex situation, the best has to of scare resources available.
1.5 RESEARCH QUESTIONS
The research questionnaires basically derived from the purpose of the study. They are formulated from relationship between variable or effect of one variable of one variable upon another.
The focus of this study by research work to identify cost control and reduction techniques in NIGERIA BOTTLING COMPANY. Hence, in the course of this study, effort has been made to find solution to the following research problem.
i. What is the impact of cost control and reduction action in Nigeria bottling company?
ii. What are the various cost control and reduction techniques used in the Kwara State Property development corporation?
iii. What are the benefits that accrue to Nigeria Bottling Company through the adoption of cost control and reduction techniques?
1.6 SCOPE OF THE STUDY
The scope of this research work is limited to Nigeria Bottling Company due to time constrain and unwillingness of the respondent in Nigeria Bottling Company.
More so, literature was reviewed on cost control and cost reduction technique and it was covered by the scope of the research work.
1.7 LIMITATION OF THE STUDY
This project is limited to the natures of the data available at the case study which tends to place more emphasis on historical matters in the constantly enlarging aspects of the economy.
However, the research work has faced some constrain as like time, lack of recent and adequate material unwillingness of the respondents and the case study, to give true replies, lack of corporation of the case study. Limitation did not hinder effective completion and equally of the research work.
1.8 ORGANIZATION AND PLAN OF THE STUDY
The research work will be divided into five chapters. Chapter one will have the background of the study, statement of the research problem, objectives of the study significance of the study, study plan and definitions of key terms.
Chapter two will treat cost control, cost reduction, effective cost control value analysis and engineering and appraisal of literature review.
Chapter three will discuss brief history of the case study, modes of data collection and analysis techniques.
While chapter four will contain introduction, data presentation, data analysis and findings.
Finally, chapter four will discuss the summary, conclusion and recommendation.
1.9 DEFINITION OF KEY TERMS
COSTING: It is the technique or a process of ascertain cost. This is due cost which can be influenced by the action of a member of an organization and it is relevant to decision making and very important in measuring operational efficiency.
BUDGET: Is a financial and quantitative statement prepared and approved prior to a defined period of time of the policy to be pursed during the period for the purpose of attaining a given objective.
COST BEHAVIOUR: In relation to volume of activities is a measure of degree of responses of a cost item to a small charge in the level of activity.
COST CENTRE: It is a location person or items of equipment in respect of which cost may be ascertained and related to cost unit for control purpose.
A review of the available journals and texts on the employment of cost management techniques is undertaken in this chapter.
2.2 COST CONTROL TECHNIQUES
John size (1998). Defines control “as guidance of the internal operation of the business to produce the most satisfactory profit at the lowest cost”. In other word cost control deals with the systematic monitoring of expenditure to ensure conformity with pre planned programmes as agreed upon by the top management.
Mr. Patrick Asiegbu (2001). Defined cost control as the guidance and regulation of operation costs by management action and the word control implies that some sort of plan is in existence like the budget for standard of individual cost items.
As pointed out above, the twins words are planning and control. It has to be pointed out that not all cost are uncontrollable.
Controllable costs are those that are definitely influenced by a given manager within a given time span (life span). The major problem is that few costs are under the sole influence price of direct material while production will influence quality consumed.
Furthermore, cost control is the regulations of the cost of operating a business with the aim of keeping cost with acceptable limits.
These limits will usually be specified as standard cost target as contained in formal operational plans called the budget if actual cost differ from planned cost by an excessive amount. Cost control action will be necessary.
Budgeting control and standard costing are examples of cost control techniques which have broad objectives of containing cost within predetermined target. The difference between the two is that budgeting control relates to a broader view of activities while standard costing goes in to dealing with unit costs of cost elements of production subjected to regular reviews of the standard.
Owter L. Wetal “Wheldone 2001). Defined budget as a financial and quantitative statement prepared and approved prior to a defined of time. Purpose of attaining a given objectives. It may include income expenditure are and the employment of capital.
“In essence, it is a tool that is used to detail what items of income and expenditure are expected to be received and incurred respectively within a period of time.
In the same terminology, budgeting controls is defined as “The establishment of budget relating to the responsibilities of executives to the requirement of policy and the continuous comparison of actual budgeted results either to secure by individual action the requirement of that policy is to provide a firm basis for its version”. What this boils down to us is that budgeting control is the planning in advance of the various function of a business so that the business as a whole can be controlled.
On the other hand, according to Battly (1999) “Standard Costing” is a predetermined as cost calculated in relation to a prescribed set or working condition correlating technical specification and scientific measurement of material and labour to the price and wage rates expected to apply during the period to which the standard cost is expected to relate with an addition of an appropriation share of budgeted overhead. Its main purpose are the provides basic of control through variance according for the valuation of stock and work in progress and is exceptional cases for fixing Selling Price.
This involves careful work study is a systematic investigation of the procedure by which work is done. The amount of work that can be done is standard how, the materials required and the type of labour expected to carry out the work with this variance came easily be sported out.
Variance is an accounting terms used to describe the difference between the budgeted and the actual performance. Variance, according to T. Lucky is an important cost O. standard cost. As a result, it facilities as the principle of concentrating on areas that deserve attention and ignoring areas that are running smoothly.
The executive attention is concentrated on important duration from budgeted items. In this way manager should not waste time on these parts of the reports that reflect the smooth running phases of operatives.
Cost control action ought to lead to cost reduction.
The conceptual objective of control is to ensure efficient use of resources as it is an ongoing process with the static objective of keeping costs within target of outermost one competition and uncertainties in the market economy make it logical to set of appropriate standard of performance and regulate cost with in standard as far as possible.
The steps of cost control follow this order setting a targets, receiving feedback when favourable or unfavourable various occur.
We shall illustrate the concept of cost control by the following low charts..