CHAPTER ONE
INTRODUCTION
BACKGROUND TO STUDY
Cost control is a vital instrument for the survival of any business organization. The aim of this work the impact of cost control in a Brewing Industry a case study of Nigeria Breweries Plc. 9th Mile Enugu metropolis is to x-ray the conceptual insight of cost control techniques and ascertain whether in practical situation those techniques in the literature are operational and also the effect it has on the organization. In furtherance of these however, similarities and dissimilarities would be examined and observation made. The control of cost is very necessary to the successful operation of different business organization. Business entity is set up as an economic institution with profit making as a primary business objective. Achievement of profitability objectives is a concern of every business for no matter the argument for the pace of profitability in modern business it still remain the primary and the only measure of corporate efficiency and vehicle for survival in competitive are turbulent business environment. To achieve this profitability objective, attempts are made by various business concerns to bring cost to its bearest minimum and the essence of this cost awareness has been further amplified by the current high cost of raw material are other production cost.
Since the introduction of austerity measure in 1982 as a result of declined countries foreign exchange earning, this gave rise to the high cost of raw material sourced outside the country. In line to maintain reasonable cost many industries resonated to finding means of sourcing raw material locally which is cheaper comparatively to foreign sourced. This drive most of these industries into agriculture in other to produce their own raw material. For instance, the malt which was used by brewing industries has such replaced by the use of maize, a result of research employed by these brewing industries.
STATEMENT OF PROBLEM
The control of cost in any organization is not an easy task, efforts are made to limited cost to the level which can be sustained by the organization. It therefore become a truism to state that three exist a problem in an organization where the cost method in operation is either not relevant or is not effectively applied to. Business organization are facing some drawn down in profit as a result of tributary allocation of cost to products and cost centre. This has been rise to:
1. High product cost
2. high product price
3. low turnover rate
4. costing method as usually adopted by an organization
In order to generate adequate cost information which would be
useful to management in the area of planning decision making are control with the price aim of reducing cost while optimizing revenue.
OBJECTIVE OF STUDY
Every human activity must have an objective, the absence of which renders plans useless the purpose of this study is to determine how what the author has leant as theories is practicalise in real life situation relating to impact of cost control in Brewing Industry. These are also some major objective of this work
• To ascertain costing method used in ascertaining the cost
• Finding out any inherent differences in its application and its impact in the organization.
• To evaluate the control systems as their effectiveness
• To ascertain costing techniques used the organization
Finally, it is hop that the research will be guide for future
decision making and serve as a bench mark for future research student in the filed of cool control.
SIGNIFICANCE OF STUDY
It remains an uncontroversial fact that any thing done for a specific purpose has it importance. This could be advantageous or disadvantageous. This significance of this research lies ithe fact that the author is now better armed to face such challenges squarely in future, should be find himself in an establishment that needs her services. Again it enable any organization to know the cost control techniques and the result of the application of such techniques. Lastly it also serve any interested researcher into cost control measure as a good background for insight into this study.
RESEARCH HYPOTHESIS
1. Ho: Lower cost per unit does not increase profit or turnover
Hi: Lower cost per unit increases profit or turnover
2. Ho: Cost control does not help in measuring managerial performance in an organization.
SCOPE AND LIMITATION OF STUDY
It would be pertinent at this point in time to say categorically and emphatically that this study would in the main be in exhaustive realizing the undisputable fact that the topic is wide, the write up has consequently been narrow to the most relevant areas. This areas being the cost control technique and its impact in brewing industry. This paper consist of fine chapter. Chapter one is an introductory chapter, chapter two give an overview of the topic and chapter three is the research design and methodology while four is for data analysis and lastly is the chapter five where the author give his finding recommendation and conclusion. Also certain limitation posed great deal of problems to the researcher and there problem include time availability, inadequate finance and restrictive nature of company’s policy to visitor on sensitive areas hindered and in-depth study of impact of cost control.
DEFINITION OF TERMS
COST CONTROL This involves all efforts to keep the actual cost incurred in line with the pre-determined cost, and by the comparision of actual cost with there predetermined costs to revel unreasonable cost in order that step may be taken to identify and if possible remove the responsible factor.
COST UNIT: A quantitative unit of product or service inrealtion to which cost are ascertain.
COST CENTRE: A location function or item of enquiring in respect of which cost may be ascertained and related to cost unit for control purpose. It is related to the unit where cost is accumulated.
MARGINAL COSTING: A costing principle whereby variable cost are charged to cost unit and fixed cost attributable to the relevant period is written of in full against the contribution for that period. It is amount of cost increased caused by unit increase in output.
