THE IMPACT OF COST CONTROL ON MANUFACTURING INDUSTRIES (A CASE STUDY OF GUINNESS NIGERIA PLC, BENIN CITY)
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THE IMPACT OF COST CONTROL
ON MANUFACTURING INDUSTRIES (A CASE STUDY OF GUINNESS NIGERIA PLC, BENIN CITY)
ABSTRACT
This study is primarily concerned with finding out the role
of cost control techniques in the assessment of manufacturing company. The
study however, was carried out to know the effect cost control has in the Benin
branch of Guinness Nigeria Plc in particular. In order to achieve this
objective, research questions were raised and related literatures were reviewed
to enable the researcher have an idea of what authors have said concertinaing
cost control and cost control techniques.
The research instrument used for this study was the
questionnaire, copies of which were administered to the respondents i.e
employees of the company under study, in order to collect data. The data
collected from the respondents to the fifteen (15) items questionnaire was
subjected to analysis after which the hypothesis of the study was tested. The
statistical tool used to test the
hypothesis was the chi-square system of analysis. The test confirmed that cost
control measures have an influence on the effective realization of cost control
objective of the companies under study. From the analysis of data collected, it
showed that cost control techniques are good indicators or effective tools for
cost control in Guinness Nigeria Plc. This , the importance of cost control
techniques in a manufacturing industry cannot be overemphasized.
TABLE OF CONTENT
Content
Page
Title page
ii
Approval page
iii
Dedication
iv
Acknowledgement
v
Abstract
vi
Table of content
vii
CHAPTER ONE
Introduction
1.1 Background of
the study
1
1.2 Statement of
Research Problems
3
1.3 Objective of
the study
4
1.4 Hypothesis of
the study
4
1.5 Scope and
limitation of the study
5
1.6 Significance of
the study
5
1.7.0 Historical
background of Guinness Nigeria Plc 6
CHAPTER TWO
Literature review
8
2.1 Concept
of cost control 8
2.2 Cost
Classification
9
2.3 Cost
Control Techniques 13
2.4 An
overview of standard costing
18
2.5
Budgetary control
20
2.6 Variance
Analysis
25
2.7 Cost
avoidance and cost reduction
27
CHAPTER THREE
Research methodology
28
3.1 Research design
28
3.2 Population of the study 28
3.3 Sample size
29
3.4 Method of data analysis
29
3.5 Questionnaire design
29
3.6 Techniques of data analysis
30
CHAPTER FOUR
Data presentation and analysis 31
4.1 Presentation of data and analysis
32
4.2 Testing of hypothesis
40
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 Summary
44
5.2 Conclusion
45
5.3 Recommendation
46
Bibliography
CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
Cost control is all knows as cost management or cost
containment, which is a broad set of “cost accounting” methods and management
techniques with the common goal of efficiency and improving business cost at
least restricting their rate of growth. Business uses cost control methods to
monitor, evaluate, and ultimate enhance the efficiency of specific areas, such
as department division of product line within their operation. During the 1990s
cost control initiatives received paramount attention from cooperate America ,
often taking the form of cooperate restructuring, diversement of peripherals
activities mass layoffs, or out sourcing, cost control strategies were seen as
necessary to preserve or boost cooperate profit and to maintain or to maintain
or gain a competitive advantage.
According to (wheldon 1994) which states that cost control is
the activities of any business enterprise which the determining factor towards
the realization of set objectives. Further more, cost control provides the
measurement of the degree to which its aims and objectives is attained, thus it
has a definite place in the activities of any organization. Cost control
technique can help a company pose good financial results and overcome difficult
situations with ease, though it is not essential to be a finance experts to
understand the definition of cost control, planning and actual implementing the
techniques can be quite a big challenge.
In the tie of recession, many firm resort to cost control
techniques such as reducing the extra facilities to the employees such as
recreational facilities. The technique might also include cutting down the
expenditure incurred on traveling by air and luxury hotel accommodation in
order the cash flow. As a part of the cost cutting measure, few firms may
postpone or cancel their plans of acquiring new companies, investing in new
business and buying new machinery or system. These techniques should be
utilized to save money and bring back financial strength of the company.
Cost control is used by different organization are different
and are largely dependent on their business model and strength of their balance
sheet. The better the implementation of these techniques, the better would be
the future of the concerned organization.
1.2
STATEMENT OF THE RESEARCH PROBLEM
The statement of the research problems are as follows
1. How can cost
control techniques be used to improve organizational efficiency.
2. Does cost
control have any significance in a manufacturing.
3. How does
management practically make use of information.
4. How is cost
control justified in an organization.
5. What are the
problems and constrains associated with the efficient use of cost control.
6. Are cost control
good performance evaluators when used properly.
1.3
OBJECTIVE OF THE STUDY
The objective of this study are as follows
1. Ascertainment of
cost: the primary objectives of cost control is to ascertain cost of each
product, process, job, operation or service
rendered.
2. Ascertainment of
profitability: Cost control determine the profitability of each product,
process, job, operation or service rendered. The statement of profit or loss
and balance sheet are submitted to the management periodically so as to know
the cost control ascertainment of the organization.
3. Classification
of cost: Cost control classifies cost in to different elements such as
material, labour, and expenses. It has further being divided as direct cost and
indirect cost for cost control and recording.
4. Control of cost:
Cost of control aim at controlling cost by setting standards and compared with
the actual, the deviation or variation between two is identified and necessary
steps are taken to control them.
5. Fixing of selling
price: Cost control guides management in regards to fixation of selling price
of the product. It is also helpful for preparing tender and quotations.
1.4
HYPOTHESIS OF THE STUDY
The hypothesis of this research work are:
Hypothesis I
Ho: Cost control does not have a significant effect on the
effective realization of the objective of Guinness Nigeria Plc.
Hi: Cost control has a significant effect on the effective
realization of the objective of Guinness Nigeria Plc.
Hypothesis II
Ho: Cost control measures are not indispensable tool for
effective management decision making.
Hi: Cost control measures are indispensable tool for
effective management decision making.
1.5 SCOPE
AND LIMITATION OF THE STUDY
It must be mentioned in this point that lot problems were
encountered in the course of this research work.
a. Time: this
research work was carried out during second semester, it wasn’t easy at all,
this research work was in great depth in my heart due to time limit.
b. Financial
Constrains: the finance available to the researcher at the time of this
research was inadequate. The researcher intends traveling to other similar
business enterprise to source for additional information but all efforts was
made due to lack of finance.
c. Insufficient
data: the entire staff of Guinness Nigeria company is not an exception of
enterprises which are unwilling to disclose information or reporting their
activities to outsider for fear of the collector or authorities.
d. Response from
others interview also posted a problem as the researcher was upholding in
collecting questionnaire, most managers of the enterprise granted while other
business participant administered questionnaire could not be found where they
kept theirs.
1.6 SIGNIFICANCE OF THE STUDY
This study will be to
i. Ensure that from the finding
management decision can be made thereby leading to a more viable company
ii. Managers whose interest is
basically to achieve an overall operational efficiency, thereby establishing
and closing the gap between the objective of variance analysis and its
application.
iii. Student of accounting and finance
are also experts in the field of management accounting.
1.7 HISTORICAL BACKGROUND OF GUINNESS NIGERIA PLC.
Guinness Nigeria Plc is a company engaged in the bottling and
marketing of products such as Guinness,
Harp lager beer, Extra smooth, Gordons spark, Malta Guinness. The first five
products are alcoholic beverages, while the last is none alcoholic beverage.
However, some of this products are not readily available in the market.
The original Guinness breweries at St. James Ghate in
“Dublin”, republic of Ireland was founded in 1859 and 1936, the second brewery
was opened in London. Guinness Nigeria Plc to import and distribute Guinness
Stout from Dublin in Ireland for sale in Nigeria. Following the great success
of the trade in Nigeria, a decision to build spinally brewery in Nigeria was
taken and later in 1960 construction of the Ikeja brewery started.
In 1962, the stout brewery at Ikeja was opened and was
commissioned on 16th of March, 1963 by Dr. Nnamdi Azikiwe (the then governor
general of Nigeria). Making only the third place in the world (after Dublin and
London) where Guinness was known as at that time. Following the increase in the
demand of the product of Nigeria, Guinness breweries was opened in Benin_ City
and Ogba in Lagos in 1977 and 1982 respectively. A brewery for Harp Lager was
opened in Benin City in 1994.
As at 1999, Guinness Nigeria Plc had three breweries. The
first one, the Ikeja brewery located at Oba Akran avenue, industrial estate in
Lagos, the Ogba Brewery located at Acine road, industrial estate along Benin
Asaba road, Benin city. But in 2004 a new brewery was built and commissioned at
Abia state. This is jointly owned and managed by Nigerians and foreign
investors but Nigerians own majority of the shares. It is a public quoted
company in Nigeria. Stock exchange (SEC) with % of it shares owned by
Nigerians. Guinness overseas limited and attomta limited own the remaining 40%.
Guinness Nigeria plc is trying to minimize cost on imported, barely malt and
sought and maize. This resulted in the successful lunching of merit lager beer
in 1986. Guinness Nigeria plc thus became the first brewery company in the
whole of country to achieve 100% local sourcing.
Guinness farm division came into existence in 1986 by the
acquisition of 4000 hectares of land in Kudu village, in Niger state to provide
for the local sourcing of local raw materials. The farm cultivate and grow
maize and sorghum as main crops in an addition to growing crops in an addition
to growing crops like cowpeas and soya beans for local consumption. Guinness
Nigeria plc contributes to Nigeria’s economy which has help in providing direct
employment to over 6000 Nigerians engaged in the production of crowns, corns,
cartons, bottles and crates but also in
the employment created for transporters and suppliers of raw materials. The
company also provide social amenities such as health care service, water supply
to host communities, sponsorship of educational programs e.t.c. the company
also generate internal revenue to government through tax to government thorough
tax and excise duties.
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