COST CONTROL AND ITS EFFECT IN THE MANUFACTURING INDUSTRIES (A CASE STUDY OF CHISCO BAKERY INDUSTRIES ENUGU)

ABSTRACT

Maximization of profit is the pursuit of every business organization profit itself is the excess of revenue over expenditure. To obtain profit, increase in selling price of the product or reduction in the cost of production is inevitable. Since excessive price increase is dreaded by the public, it becomes necessary to achieve the business objective through controlling the cost production each product.

This project was therefore undertaken to give actual background on cost control measure, the heed for the control, cost items to be controlled and effect of uncontrolled cost of production on the organization, using Chisco Bakery industry Enugu as a case study.

According to the study, uncontrolled cost could lead to higher operating costs, lower profit marginal and dissatisfaction to the chairman of the company.

Using questionnaire methods it was found that cost could be controlled in different manufacturing areas such as material, labour and overheads. Also discussed was the major finding that the company had not been able to produce to its installed capacity, it employed a system of remuneration that guarantied a fixed salary and its production.

More ever, The use of standard costing has been advocated because, it will avail the company the opportunity of comparing actual cost with standard in order to check unnecessary various and also to make for easier interpretation of management reports.

CHAPTER ONE

INTRODUCTION

1. BACKGROUND OF THE STUDY

With the attendant development in Hi tech material souring and government economic policies, manufacturing sector is becoming more complex and completive as day price of our locally manufactured goods is of public concern. The increase in prices of our attributed to high cost of production of goods. It is therefore for this reason that the need for control arose. Beside the government policy of privatization and commercialization calls for preparedness on the part of manufacturing sector to square up for the stiff  competition.

Cost control becomes imperative when one looks at the objectives of firms which among other thing include making as much profit as possible to satisfy the investors, becomes a good corporate entity to customers, government, local community and other external members. All these arms are tied to the cost control measures.

 Cost control be done in two ways:

Operating and accounting controls.

          Controlling cost through personal observation and supervision of operations does operating control. Such control attempts to minimize wasted other costs. And accounting control on the other hand entails the creation of a system of recording, which will establish accountability for cost that is comprise with standard. It is therefore against this background that this study and attempts to critically X – ray the effects of cost control in a manufacturing organization or company.

          Metro best international is a bakery which engages in the baking of high quality bread-Chisco bread. There product is highly competitive in Enugu and its environments. The main raw materials of the firm is floor and the production capacity is 20 bags everyday. The other raw material are (1)sugar(2)salt (3)water (4) Butter (5) flavorings (6) groundnut oil (7) Preservation and yeast.

          The bakery industry is strategically located at N01 metro best Amachi Road Akwunawo Enugu. It has about 50 staff comprising about 15 skilled and 35 unskilled the bakery has one bus that convey workers to and from office and there is shift for workers they have four (4) vehicles which they use in marketing of their products.

The various departments in the bakery are:

1. Administrative department
2. Production department
3. Sales department
4. Purchasing department
5. Accounts department
6. Engineering/ maintenance department.

ADMINISTRATIVE DEPARTMENT: 

The administrative department taken care of the activities of the business and welfare of the worker. If there is a new policy in the business, the administrative department will pass it low to the worker the department takers care of employment of new staff, questionable character (5).

PRODUCTION DEPARTMENT:

 This department is where the bread is baked the processes it involves are:

1. Mixing 2. Milling 3. Cutting 4. Baking (over)

In the mixing sector some of the material like floor, water, sugar, salt, and yeast preservative, flavoring (Mixer) where it forms a lump/mixed floor. The mixer makes the work easier , faster, and none laborious from here the mixed floor will be taken to the milling sector.

In this sector the mixed floor is passed through the milling machine and Butler and groundnut oil are use to rub on the mixed floor so that it will be very smooth and soft and ready for cutting before it will be put in the oven.

From the oven, the mixed floor or dough 2which are in pains are put inside the electric oven for baking. After baking the bread will now be ready for sate.

MARKETING DEPARTMENT:

The marketing officers who are in this department take care of the bread that are baked. They make sure that bread gets to their sales outlets and possibly to the final consumers. By selling this product, the bakery makes profit for the owners (s)

ACCOUNTS DEPARTMENT:

 The proceeds from marketing department are taken to accounts department whom banks the money. They takes care of the workers salaries, overhead expenses like payment of Nitd and Nepal bills the keep financial records of the bakery, prepares monthly trading and profit and loss accounts. They know when the bakery is making profit or loss and advice the owner (s) on what to do

PURCHASING DEPARTMENT:

This department makes requisition and often approval and authorization. It will now be sent to the account department to release money for purchase of raw materials and other stuffs.

MANAGEMENT DEPARTMENT:

Maintenance department takes care of the maintenance of the bakery machines, building and other things 

STORE DEPARTMENT:

Here, we have the chief storekeeper and some other staff whose main work is to make sure that the raw materials in the store are saves. 

1.2     STATEMENT OF THE PROBLEMS

The manufacturing organization are faced with those problems peculiar to any new innovation especially in an already distressed economy. In Nigeria, it has been observed that because of persistent rise in prices of locally produced goods and deregulation of economy, the manufacturing sector is faced with rather stringent conditions.

Today’s manufacturing is a lot more scientific and innovative. Competition among local and manufactures and between the local and imported commodities arise a lot more intense through subtle it has gone beyond the mere production of goods.

Consequently, this work seek to study the possible relationship that exist between to study the cost control and the survival of manufacturing firms.

1.3     OBJECTIVE OF RESEARCH

The objective of this research is to examine the effect of cost control in the manufacturing firms. And these include:

1. To examine the production
2. To evaluate the effectiveness at the control system
3. To final out any inherent deficiency and to make recommendation for solving them.
4. To course out with a realistic and feasible proposal on how capacities both in labour and materials within the enterprise could be eliminated.
5. This work will serve as past of the fulfillment at my requirement for the award of the national diploma in accountancy.

1.4     SCOPE DELIMITATION OF STUDY

This work is essentially concerned with the place of proper and adequate financial records keeping  for the success of the cost control in the manufacturing industry.

How ever, special reiteration bakery Enugu, emaciate cause of improper and inadequate financial records keeping in the cost control and its effect in the manufacturing industry, were discoursed in a very special details.

No doubt, there are problem usually encounter in a research of this nature and magnitude. The cause is not farfetched, most entrepreneurs of manufacturing industry, refuse to disclose useful information that will aid the researcher to build no systematic study to their mass illiteracy, ignorance and fraudulent desire that it will eventually expose the secrets of their profits.

One of the limitations of the study is scarcity of available data as regards to the topic.   

1.5     RESEARCH QUESTIONS

The five (5) research question that were formulated are as follows:

1. Does cost control influence the performance of a manufacturing company?
2. How does the management get supplied with the relevant information for decision making?
3. Is cost control in manufacturing company effective?
4. Does the available cost control performance of a manufacturing company.
5. To what extent does cost control help in eliminating the lolled capacities both in labour and materials with in the manufacturing company.

1.6     SIGNIFICANCE OF THE STUDY

It is a fact that cost control has a big effect in the manufacturing company. These effects cannot be over emphasized. Since that it can be relevant in one-way or the other specially manufacturing companies.

          More over, government agencies will derive great benefits from this research work, in sense that it will help to creates more researchable topics about cost control and it’s effect in the manufacturing companies and finally brings out solutions for such problems. 

 1.7    DEFINITION OF TERMS

Cost: This is the amount of expenditure (actual or nominal) incurred on or attributable to a specified activity or thing.

Cost Control: This involves all effort to keep the actual cost incurred in line with pre-determined cost and by comprise of actual unreasonable cost in order that steps may be taken to identity and it possible remove the responsible factors.

Manufacturing Organization: These are those organization which combine men, materials and money in an effective and efficient manner with the aim of producing goods.

Problem: A matter difficult of settlement.

Solution: A question or puzzle propounded for solution