COST CONTROL AND COST REDUCTION AS A MEANS OF IMPROVING PROFITABILITY IN A BUSINESS ORGANIZATION (A CASES STUDY OF OKIN BISCUITS LIMITED, OFFA)
TABLE OF CONTENTS
1.1 Statement of the problem
1.2 Objective of the study
1.3 Significant of the study
1.4 Scope of the study
1.5 Research methodology
1.6 definition of terms
1.7 Plan and organization of the study
2.1 Cost control and cost reduction
2.2 Cost classification
2.2.1 Direct and indirect cost
2.2.2 Fixed and variable cost
2.3 Cost control techniques
2.3.1 Planning, budget and budgetary control
2.3.2 Standard costing and variance
2.4 Cost reduction techniques
2.5 Where cost reduction is needed
2.5.1 Direct cost
3.1 Population of the study
3.2 Sampling Design and size
3.3 Source of data
3.4 Data collection instruments
3.5 Method of data analysis
3.6 ProfileS of okin biscuits limited, Offa.
PRESENTATION AND DATA ANALYSIS
4.1 Data presentation
4.2 Data analysis
Summary, Recommendation and conclusion
The success that any producer may record in selling his goods or services profitably is likely to depend upon his ability to control his cost and upon the extent to which he can keep them below the selling price imposed upon him by competition.
Therefore, cost control can simply be defined as the regulation, limitation or confinement of cost.and it can also be defined as the regulation by management action of the cost of operating an undertaking ,particularly where such action is guided by cost accounting.
It covers the control of materials usage and prices of wages cost separating the effect of efficiency from rates of pay, or maintenance and service cost, and all other items of indirect expenditures.
In an organization it is an act of making necessary adjustments after comparing the actual cost with a standard or targeted cost the control process include the steps of establishing standards and taking corrective measure.
Studies dealing with potential cost control and various adjustments to which may results in cost control are therefore very essential for improving the efficiency with which the conduct of any business is performed, such a resultant improvement can be of immence benefit to both the marketers and the altimate consumers of the products of the business.
Effective cost control consists of two aspects they are operational cost control consists which has to do with type of control,which exist in the very small firms where the sole owner could personally control cost through personal observation and direct supervision of operation.Accounting cost control on the other hand involves creating a sound system records keeping which will establish accountability for cost and the employment of current, pertinent and concrete accounting and statistical reports to reveal how people who are responsible for cost are discharging their responsibilities.
1.1 STATEMENT OF PROBLEM
This project is set out to examine the problem of the existing small scale industries, a case study of Okin Biscuits Limited Offa, Kwara state.
Smalls scale industries have common problems nationwide, but some of the major one that is being faced by Okin biscuit limited Offa will be discuss in this research.
Problem of marketing their problem products is one of the problems facing the organization. Because there are some other industries with the same products but better marketing strategies are been put in placed.
Lack of capital and low sales is another problem that is facing the organization.
Another problem is inadequate trained manpower since one of the major aims of a privately owned industries is to maximize profit, they find it difficult to engage in sufficient and adequate trained personnel. They tend to manage the few at hand, hence there is insufficient technical advice as there are inadequate technical training facilities for staff and these could lead to poor quality products in some cases.
1.2 OBJECTIVE OF THE STUDY
i. To find out the production process of the industry
ii. To find out the problem facing the industry and how to remedy them.
iii. To find out the occupational importance of the industry in forms of employment provision.
iv. To find out the benefit of the industry in terms of their production.
1.3 SIGNIFICANT OF THE STUDY
i. The study will go a long way to help small scale industries to improve their profitability.
ii. This study will help the management to know the causes of increase or decrease in profit making
iii. The study will also be of tremendous importance to small scale industries to know cost control and cost reduction techniques.
iv. The study will help to indicate source of was wastages either of time, materials or the usage of machineries.
1.4 SCOPE OF THE STUDY
The study will focus on cost control and cost reduction techniques that is being used by the management to improve the level of profit with particular reference to Okin biscuits limited, offa.
1.5 RESEARCH METHODOLOGY
The method used in the research work is based on primary source which cannot of both the oral interview and questionnaire.
1.6 DEFINITION OF TERMS
The following terms are defined so as to bring out their meanings and to distinguish them from the ordinary usage.
i. Budget: the institute of cost and management accountants (ICMA) gives the following definition in the terminology.
Budget: This is a financial or quantitative statement prepared and approved prior to a defined period of time. It provides a focus for the organization, aids the coordination of activties and financial and/or quantitative plan of operation for a forth coming accounting period.
ii. Budgetary control: This is a system of controlling cost which includes the preparation of budgets, coordinating the departments and establishing responsibilities, comparing actual performance with that of budgeted and actual upon results, to achieve minimum profitability.
iii. Controllable and uncontrollable cost: Controllable cost is defines as those cost that are directly influenced by a given manager within a given period of time.
Uncontrollable cost on the other hand are cost that can not be influenced by a given manager within a given period of time.
iv. Cost control: This is the guidance and regulation of operating cost by management action. It also involves of methods of controlling cost within a pre-determined target cost control action lead to excessive spending.
v. Cost reduction: This is an active, dynamic concept which attempts to extracts more from the factors of production without loss of effectiveness. Cost reduction activities are planned effort to reduce expenditure.
vi. Fixed cost: This is a cost which is incurred for an accounting period and which within certain output limits tends to be unaffected
by the function in the level of activity.
vii. Variable cost: This is defined as cost which varies with the level of activity.
viii. Limiting factor: This are factors which influence must first be assessed in order to ensure that the functional budgets are reasonably capable of fulfillments
1.7 PANS AND ORGANIZATION OF THE STUDY
This project work comprises of five (5) chapters; chapter one of the projects deals with the introduction of the study which comprises of the following:
⦁ Statement of the problem, objective of the study significant of the study, scope of the study, research methodology, definition of terms and finally plan and organization of the study.
⦁ Chapter two treats the current literature review which includes cost control and cost reduction, direct and indirect cost. cost classification, fixed and variable cost, cost control techniques, planning, budget, and budgetary control; standard costing and variance, cost reduction techniques, where cost reduction is needed, direct cost overhead.
Chapter three highlights the research methodology which consists of introduction, population of the study, sampling sign and size, sources of data, data collection instruments, method of data analysis and profile of case study.
Chapter four discuss the presentation of the results, which consist of capitalization, cost control techniques area where cost reduction are concerned, sources and causes area where cost reduction are concerned, sources and causes of unnecessary cost, wastes and deposition.Action taken to reduce waste, cost reduction techniques,effect of cost control and reduction and lastly programmes on the activities of the case study.
Finally chapter five throw light on the findings, summary, conclusion and recommendation.
Cost control action ought to lead to reduction in excessive spending (i.e. when material wastage is higher than budgeted or productivity level is below the agreed standards) and maximize the company’s profit.
However, a cost reduction programme can be directed towards reducing expended cost level i.e. cutting down below current budgeted or standards level by purchasing new equipment or changing method of working i.e. both budgeted and standard reflect current cost and conditions are not necessarily the cost and conditions which would minimize cost.
2.1 COST CONTROL AND COST REDUCTION
Cost control is simply the regulation of the cost of operating a business and it is concerned with keeping expenditure within acceptable limits. The prevailing assumption in cost control is That,unless cost exceeds budgeted or standard by an excessive amount, the control of cost is satisfactory.
Cost reduction on the other hand is a planned, positive approach at reducing expenditure where it is in excess or a deliberate decrease of an existing standard level of cost.