IMPACT OF COST CONTROL SYSTEM ON ORGANIZATIONAL PERFORMANCE IN MANUFACTURING INDUSTRIES (A STUDY OF NIGERIA BOTTLING COMPANY)
- Project Research
- 1-5 Chapters
- Quantitative
- Mean and Standard Deviation
- Abstract : Available
- Table of Content: Available
- Reference Style: APA
- Recommended for : Student Researchers
- NGN 3000
Background of the study
Today's corporate organizations operate in an increasingly aggressive business climate marked by increased global rivalry, shorter product life cycles, technological development, and consumer expectations for greater product diversification. Babatolu, Aigienohuwa & Adewumi (2015) assert that these are problems for managers who must examine more effective means of gaining a competitive edge and boosting performance, as their actions have an impact on the national economy. According to Uba (2020), with the attendant development in high-tech material sourcing and government economic policies, the manufacturing sector is becoming more complex and competitive as the price of our locally manufactured goods is of public concern, and in most cases, price increases are often attributed to high production costs. Significantly, Izunna (2018) contend that, in addition to the government's privatization and commercialization policies, the industrial sector must be prepared to face tough competition.
As a result, manufacturing enterprises require an effective control plan to handle hazards and opportunities in the environment, as well as to continually add value to the products and services provided. They must develop specific business plans that are backed by suitable and efficient production processes, organizational design, and control systems. New advancements and advances in information technology (IT) in connection to accounting applications are facilitating these strategies, design, and control systems (e.g. Harley, & Emery 2016). According to Pandy (2019), the fundamental goals of every corporation are to maximize shareholder value, maximize earnings, and restore customer satisfaction. Non-financial goals, on the other hand, include prioritizing financial performance and professional progress. The majority of attention is focused on profit maximization in particular. Cost management must be prioritized in order for organizations to achieve their most critical goals while reducing their spending to a minimum.
According to Brumbaug (2018), corporate entities should watch the cost and the profit would take care of itself. The conclusion is that costs should be managed rather than starting on unscientific cost-cutting measures that may result in inferior product quality. Costs grow as various production activities are undertaken, and the need to keep costs under control develops as standards for production are established and actual production is carried out, resulting in deviations that can only be controlled or eliminated through efficient cost control. According to Brumbaug (2018), corporate entities should watch the cost and the profit would take care of itself. The conclusion is that costs should be managed rather than starting on unscientific cost-cutting measures that may result in inferior product quality. Normally, management is required to use a variety of strategies and techniques in order to regulate (control) rather than minimize costs. According to Sekeroglu & Altan (2019), a cost control system comprises of techniques and processes that serve to govern the cost of operating a business and guarantee that costs do not exceed a specific threshold. Because profitability, among other things, is the basis of every organization, there will be a need to incur fair expenditures, and management will be responsible for ensuring cautious and efficient use of resources in order to meet the established standard or objective. Shah & Pradhan (2016) further opined that cost control is accomplished by the establishment of standards and the maintenance of performance in accordance with those standards, since as management strives to raise productivity for more profit, costs will rise, and cost collection will be handled by each area of responsibility.
Statement of the problem
In recent years, the cost of things made in Nigeria has risen to levels that are out of reach for most Nigerians. Bloch (2014) described how the manufacturing sector has decreased, with many businesses closing and others reducing output levels. Factors that have contributed to this reduction since 2008 include severe hyperinflation, which has resulted in higher manufacturing costs, lower consumer disposable income, and limited investment availability. According to Mapakame (2015), businesses, particularly manufacturing firms, are finding it challenging to raise earnings and sales volumes owing to a variety of problems. Okwo, & Ugwunta, (2017) observed that few enterprises are achieving major growth in market share or sales volumes in an environment where consumer disposable income is extremely low. In contrast, some or the majority of manufacturing firms will go as far as using low-quality raw materials to cut production costs in order to maximize profit. Customers will never cease seeking for the best possible quality and increased performance if they are not taken into account. If the company's costs are too high, shareholders will undoubtedly have an impact on the price of the company's shares.
As a result, management scholars and business academia have been encouraged to identify the best possible strategy for manufacturing enterprises to manage costs while also suggesting that huge investments in information technology be made while acknowledging its contribution through cost control systems.Several studies have been undertaken on a wide range of subjects relating to cost management and company success (Olalekan & Tajudeen, 2015; and Abdul & Isiaka 2015). These audits focused on the company's financial performance rather than the need of implementing a cost control system. This research aims to fill that need by examining the impact of cost control system on organizational performance in manufacturing industries with emphasis on Nigeria bottling company.
Objective of the study
The broad objective of this study is to examine the impact of cost control system on organizational performance in manufacturing industries (a study of Nigeria bottling company). Other specific objectives includes to:
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To ascertain the accounting systems which are designed to control costs.
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Appraise various cost control techniques utilized in Nigeria bottling company.
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Investigate whether cost control system has significant effect on budget planning of manufacturing company.
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Investigate whether cost control system has significant effect on expenditure monitoring in manufacturing company.
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Explore factors affect proper cost management in Nigeria bottling company.
Research Questions
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What are the various accounting systems designed to control and reduce costs?
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What are the various cost control techniques and its impact on Nigeria manufacturing firm?
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Does cost control system has significant effect on budget planning of manufacturing company?
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Does cost control system has significant effect on expenditure monitoring in manufacturing company?
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What factors affect proper cost management in Nigeria bottling company?
Research hypotheses
Ho1: Cost control system has no significant effect on budget planning of manufacturing company.
Ho2: Cost control system has no significant effect on expenditure monitoring in manufacturing company.
Significance of the study
The complexity and growth in intercontinental business activities coupled with the development of more sophisticated control/accounting application software; brought to the fore the need to study the effect of information technology and cost control systems on corporate performance.This study is an attempt to add to literature in these areas.The manufacturing sector of Nepal is emerging and increasing than it was in the past. In current days, Nepal is confronting several issues with respect to industrial sector. In other words, this sector is facing many problems and is expanding in slow motion. This type of research will be conduct first time in Nepal. In this connection, this study can be helpful to the manufacturing companies to review and develop their cost control systems. Furthermore, this study will be beneficiary to decision makers to make decisions about cost control instrument, their uses and minimization of cost. This study also will be useful to the concerned academicians, researchers, students, investors, government officials, and others stakeholders of respective industries.
Scope of the study
The scope of this study focused on the impact of cost control system on organizational performance in manufacturing industries using Nigeria Bottling Company as case study. The study further examined the accounting systems which are designed to control costs, appraise various cost control techniques utilized in Nigeria bottling company, investigate whether cost control system has significant effect on budget planning of manufacturing company,investigate whether cost control system has significant effect on expenditure monitoring in manufacturing company and explore factors affect proper cost management in Nigeria bottling company Lagos State.
Limitation of the study
Every study is conducted under some constraints and limitations. Similarly, this study cannot be exception and free from limitations. The accuracy of the study will largely depend upon the data provided by the sample companies. Some limitations of this research study are outlined as follows:
1. The research is going to conduct by taking few manufacturing companies listed in NEPSE as sample.
2. The accuracy of the result will totally base on the data provided to the researcher by the responses of companies’ managers.
3. The findings of this study may not represent to others settings.
Definition of terms
Manufacturing Sector: The Manufacturing sector comprises establishments engaged in the mechanical, physical, or chemical transformation of materials, substances, or components into new products.
Cost: The amount or equivalent paid or charged for something.
Cost Control: Cost control is the practice of identifying and reducing business expenses to increase profits, and it starts with the budgeting process.
Organizational Performance: Organizational performance is the ability of an organization to reach its goals and optimize results.
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