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Full Project – IMPACT OF COST ACCOUNTING INFORMATION ON PRICE DETERMINATION CASE STUDY OF SOME NIGERIAN MANUFACTURING COMPANIES

Full Project – IMPACT OF COST ACCOUNTING INFORMATION ON PRICE DETERMINATION CASE STUDY OF SOME NIGERIAN MANUFACTURING COMPANIES

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Full Project – IMPACT OF COST ACCOUNTING INFORMATION ON PRICE DETERMINATION CASE STUDY OF SOME NIGERIAN MANUFACTURING COMPANIES

 

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ABSTRACT

This research study was conducted to determine the impact of cost accounting information on price determination in some manufacturing companies in Nigeria. The objectives of the study were to determine the components of manufacturing cost information and also to identify the lapses therein. Literature review on the topic was aimed at cost determination, cost control concept, cost performance evaluation, direct and indirect cost and fixed/variable cost. Data collected were analysed using frequency table and chi-square. The result of data analysed showed that cost accounting information contribute a lot on price determination of products.

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF STUDY

The studies of modern cost accounting yield an insight into both the accountant and management roles in an organization.  Management in most cases wants to know how performance is measured and often depend on accounting information for guiding their decisions. Decision making in this context is defined as making purposeful choosing from among a set of alternative cause of action in light of some objectives.

Cost accounting has a main purpose of accumulating cost of an organizational products and services. Managers of manufacturing companies can use product cost information as a guide in setting selling prices and for inventory valuation and profit determination. According to Adeniyi (2000:10), cost control/reduction involves the predetermination of cost and comparison of predetermination budgeted or standard cost with the actual cost.

Standard cost which is closely linked with the budgeted is predetermined per unit cost, usually analyzed into elements: Direct Material, Direct Labour and Factory overhead. Standard cost is an effective aid to control, due to the link with budget plans and decision making, because it represents anticipated cost, that is, a cost which will exist in the future and is likely to be affected by decisions made by the management.

Carroll (1953), Cost control information always refers to as the control of expenditures within predetermined levels, which entails the minimization of resources so as to achieve a given objective. These controls should be continuous activity aimed at improving efficiency and quality by ensuring that the right resources are provided and efficiently used. It is on this basis of this cost accounting information functions, that, this research is embarked upon to ascertain to what extent some Nigerian Manufacturing Companies “Nigerian Breweries plc, Aqua-Rapha Nig. Ltd, and Anammco Nig. Ltd.” have used this cost accounting information in the determination of its product prices.

Attempts will also be made in the course of this study to ascertain whether in practical situations, those techniques in literature review are operational in some Nigerian manufacturing companies. The major point is that the focus of a modern cost accounting information system is on helping manages to deal with both the immediate and the distant futures.

1.2   STATEMENT OF THE PROBLEM

The private sectors driven economic trend in Nigeria, calls for serious cost accounting information consciousness among manufacturing companies. In light of this, manufacturing companies in Nigeria faced with the task of not only profit maximization, but a quest for survival amidst competition, legal, government, economic and environmental constraints.

Moreover, external factors such as inconsistency in fiscal policies do not lend themselves to be manipulated by manufacturing companies in Nigeria. Example is deregulation etc, have left Nigerian Manufacturing Companies with low capacity utilization with its attendant high cost of fixed overhead per unit production, high cost (fluctuations) of foreign exchange which causes high cost of raw materials and plants and machinery.

The effects of high cost of local quality products are that the consumers boycott these quality products to cheaper one on high quantity but low quality. These limits the scope of market for these manufacturing industries and in the unlikely prospect of export, the final consequences is rationalization of work force.

Furthermore, nonchalant attitude of many managers or lack of professional cost accountants to cost accounting information, has affected the profitability of many Nigeria manufacturing companies, especially government owned companies. Relevant, reasonable and unreasonable costs are incurred and charged to profits of the companies. This affects the growth of the companies, and also affects their qualities/quantities which are the greatest intents of the consumers. Other problems are:

(a)    To highlight on management inadequate concern over proper pricing guide through cost information.

(b)    To take necessary condition for a costing system.

(c)    To evaluate the present state of the application of the cost accounting information in the determination of prices.

(d)    To appropriate basis of preparation of the cost.

(e)    To determine problems affecting the effective application of the cost information in prices determination.

(f)     To react to the application.

(g)    To recommend a more effective and efficient way of applying cost information.

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