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Effects Of Standard Costing On The Profitability Of Manufacturing Companies
[A CASE STUDY OF NIGERIAN BREWERIES PLC,AMA, UDI LOCAL GOVERNMENT OF ENUGU STATE]
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There has been decreased profitability resulting from increased costs.
In effect, requires a greater cost reduction and profit optimization.
This can only be achieved through setting reliable standards, ensuring
that such standards are mentioned and variances not adversely very large
(significant) without proper cause. The system helps cost reduction to
increase profitability. Another major problem centers on lack of
adequate control of scarce resources by indigenous manufacturers. Most
of the resources used require special storage facilities where they are
stored before they are utilized to avoid spoilage. In most cases, the
storage facilities might be beyond the reach of some manufacturers.
Along the line, most manufacturers do not have adequate control over the
resources as they are easily impact on the government. Government
policies may be favorable or unfavorable to manufacturers in Nigeria;
they can be evidenced to restriction an total ban as most of them are
being imported.
The use of unqualified and inexperienced accountants
by some industries pose a greater problems to such industries for the
accountant cannot adequately apply the accounting techniques required of
them on standard costing.
1.3 OBJECTIVES OF THE STUDY
While carrying out this research, the following aspects were borne in mind;
1. To discover if the application of standard costing techniques have any effect on the profitability of manufacturing companies.
2. To explore the relationship between standard costing and profitability in manufacturing companies in Nigeria.
3. To determine whether standard costing techniques and principles are being adopted and practiced in Nigerian manufacturing industries.
1.4 RESEARCH QUESTIONS
1. Does the application of standard costing techniques have any effect on the profitability of manufacturing companies?
2. What are the relationship between standard costing and profitability in manufacturing companies in Nigeria?
3. Are the principles of standard costing and standard costing techniques being adopted and practiced in Nigeria?
1.5 HYPOTHESIS OF THE STUDY
To achieve the objectives of this study which is on the effect of standard costing on the profitability of a manufacturing company, the researcher formulated three hypotheses that will be tested in the process of this study. They are as follows;
1. H0: The application of standard costing techniques has no effect on the profitability of manufacturing companies in Nigeria.
H1: The application of standard costing has effect on the profitability of manufacturing companies in Nigeria.
2. H0: There is no relationship between standard costing and profitability in manufacturing companies in Nigeria.
H1: There is a relationship between standard costing and profitability in manufacturing companies in Nigeria.
3. H0: The principle of standard costing and the standard costing technique are not being adopted and practiced in Nigerian manufacturing companies.
H1: The principle of standard costing and the standard costing technique are being adopted and practiced in Nigerian manufacturing industries.
1.6 SIGNIFICANCE OF THE STUDY
It is believed that standard costing aids management to plan for the future, and if any justification is required for this research project on the effect of standard costing on the profitability of manufacturing industries, the view of Robert Appleby, one of the early British industrialist should be released on. Appleby regards the key to managerial success as the setting of standards for all business activities and measurement of performance against the standards. He states that financial measurement should penetrate into any cranny of the enterprise and in doctrine all management in their working habit. In this regards, there is need to prove whether standard costing is a more viable and preferable option to other costing methods adopted for each products produced. There is a limit to the price charged to production.
In effect, cost should be given maximum attention since revenue less cost gives a balance of profit. Profit should be increased as it is every industry is aiming at.
1.7 SCOPE AND LIMITATION OF THE STUDY
This research project is restricted to the manufacturing industries of Nigerian breweries plc. The researcher focused on the Ama Brewery located at Eke, udi local government area of Enugu state as this industry operates under similar conditions as its counterparts within Nigeria an will present similar problems.
As regarding the limitations on this research project, it would be impossible to include all manufacturing industries of Nigeria brewery plc at every location, therefore, this study was limited to Ama brewery, Eke, Enugu state.
Time constraint was another strong factor that posed as a limitation to this research because the study was carried out when the researcher had so much work load. Thus, it was difficult for the researcher to meet up some of the appointment with respondents.
Another limiting factor to this research project was the uncooperative of some staff(s). Some of the staff(s) of the company taken into consideration refused to be interviewed for the fear of official reprisal, if they give out some committed information. This made it difficult for the researcher to collect much primary information.
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ABSRACT - [ Total Page(s): 1 ]ABSTRACTThe topic of this research is effects of standard costing on the profitability of a manufacturing company. The purpose of this study was to discover if the application of standard costing techniques have any effect on profitability, to explore the relationship between standard costing and the profitability of manufacturing companies and also to determine whether standard costing techniques and principles are being adopted and practiced in Nigerian manufacturing companies (Nigerian brewer ... Continue reading---
