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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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1.8 DEFINITION OF TERMS
The concept of standard costing as predetermined or forecast estimates of cost is wide and varied. The terms used in this research work intend to have the same understanding with the definition of the standard cost by the institute of cost and management accounting (ICMA) as “the predetermined cost calculated in relation to the prescribed set of working condition. Co-relating technical specification and scientific measurements of materials, labor and wage rate expected to apply within the period which the standard relates within an addition of appropriate share of budgeted overhead. Its main purpose is to provide basis for control through variance accounting for the valuation of stock and work in progress, and exceptional
cases for fixing selling prices. Some of the words used in this research project are defined as follows;
 Standard costing: implies setting up standard costs for goods and services.
 Standards an budgets: both standards and budgets are concerned with setting performance and cost levels for control purposes.
 Costing standards: meaningful standards which can be used for control purposes rest on a foundation of properly and standardized methods and procedures and comprehensive information system.
 Material standards: this implies setting the material content of a product.
 Labor standard: implies predetermining the exact grades of labor to be used as well the times involved. Planned labor time can be expressed in standard hours.
 Overhead standard: predetermined overhead absorption rates are the standards of overhead for each cost center using budgeted standard hours determined.
 Standard hour: this is defined as the quantity of work achievable at standard performance, expressed in terms of standard unit of work in a standard period of time.
 Variance accounting: this is an account that centers on future planning activities of an organization as compared with the historical activities, the activities being expressed in budgets, standard cost, standard selling price, standard profit margin and difference between those and the comparable actual results to be accounted to the management periodically and the responsibility centers, the analysis centering on the operating profit variance.
 Variance analysis: it is concerned with the section of variance accounting that relates to the analysis into constituent section and variances between planned and actual performance.
 Cost variance: this refers to the difference between the standard (planned) cost and the comparable actual and historical cost incurred during the specified time period.
 Controllable variance: it is a cost variance which can be identified as the primary responsibility of a specified person.
 Sales variance: this is the difference between the budgeted value of sales and the actual value of sales in a given period of time.
 Profit and loss variance: this is the difference between the planned profit and actual profit and loss.
 Profitability: this means the ability to make profit from all business activities of an organization, firm, company or an enterprise.
 Profit: this refers to the total income earned by the enterprise during the specified period of time
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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---
