Impact of Activity-Based Costing on Manufacturing Firms Across Northern Nigeria
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Background of the Study
Manufacturing firms in Northern Nigeria face rising competition and cost pressures. In response, many are adopting more sophisticated cost management techniques, such as Activity-Based Costing (ABC), to allocate costs more accurately and improve decision-making. ABC focuses on identifying the activities that cause costs and allocating them to products based on the consumption of those activities. This study aims to assess the impact of ABC on cost management, profitability, and operational efficiency in manufacturing firms in Northern Nigeria.
Statement of the Problem
Manufacturing firms in Northern Nigeria often struggle with inefficient cost allocation systems, leading to poor pricing strategies and reduced profitability. The adoption of ABC has been suggested as a solution to improve cost allocation and operational efficiency. However, there is limited empirical evidence on its effectiveness in the region.
Aim and Objectives of the Study
Aim: To assess the impact of Activity-Based Costing (ABC) on manufacturing firms in Northern Nigeria.
Objectives:
- To evaluate the extent to which manufacturing firms in Northern Nigeria have adopted ABC.
- To assess the impact of ABC on cost allocation and pricing decisions in manufacturing firms.
- To examine the effect of ABC on profitability and operational efficiency in these firms.
Research Questions
- To what extent is Activity-Based Costing implemented in manufacturing firms in Northern Nigeria?
- How does ABC influence cost allocation and pricing decisions in manufacturing firms?
- What impact does ABC have on the profitability and operational efficiency of manufacturing firms?
Research Hypothesis
- H₀: Activity-Based Costing does not significantly impact the cost allocation and pricing decisions of manufacturing firms in Northern Nigeria.
- H₀: There is no significant relationship between the use of ABC and the profitability and operational efficiency of manufacturing firms.
Significance of the Study
The findings will help manufacturing firms in Northern Nigeria understand how the adoption of ABC can improve cost management and profitability. It will also provide insights into the challenges of implementing ABC and its potential for improving operational efficiency in the region's manufacturing sector.
Scope and Limitation of the Study
The study will focus on manufacturing firms in key cities in Northern Nigeria, such as Kano, Kaduna, and Bauchi. Limitations may include difficulties in obtaining financial data and varying levels of ABC adoption across different firms.
Definition of Terms
- Activity-Based Costing (ABC): A cost accounting method that assigns costs to activities based on their use of resources, and then allocates these costs to products based on their consumption of these activities.
- Manufacturing Firms: Companies involved in the production of goods from raw materials in sectors such as textiles, food processing, and cement.
- Operational Efficiency: The ability of a firm to deliver goods or services in the most cost-effective manner without compromising quality.
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