Cost Accounting And Its Application To Management Planning, Control And Decision Making (A Case Study of Nigeria Bottling Company (NBC) Kaduna)

Project and Seminar Material for Business Administration and Management BAM

Cost Accounting And Its Application To Management Planning, Control And Decision Making (A Case Study of Nigeria Bottling Company (NBC) Kaduna)


This research work is aimed at highlighting the role played by Cost accounting information to the planning, control and decision making process of the management of an organization using Nigeria bottling company (NBC) as a case study. If identify the different costing techniques and methods available, the type of information produced by an accountant and how each information fits into the information need of management as stated in the alternative and as discovered by the researcher through questionnaire and personal interviews. That is, the prospect of a manufacturing company Endeavour is to found out, that for any organization to be successful, there must be accounting department to prove timely, adequate, relevant and correct information regarding the cost of products, processes and general running of the firm and fix selling price for products and services. An independent accountant and cost accountant need to be present for possible production of relevant information.

Chapter One

1.0 Introduction

1.1 Background of the Study

The main theme of this project is to bring to highlight the importance of costing to the existence of any organization, using the Nigeria Bottling company as a case study.

Every activity and operation of an organization involves cost. In view of this, I intend to discuss the objectives, principles, techniques and methods of costing relating to the analysis and gathering of cost information for planning, control and decision making.

It must be emphasized, that the existence of a sound well organized basic costing system is fundamental to whatever use is made of the information whether for routine cost ascertainment purposes or for a one – off decision.

Decisions depend on financial factors therefore it is of utmost importance that proper costing methods and techniques suitable for an organization operations to be ascertained, adopted and operated effectively and religiously throughout the organizations` process and operations.

In essence, organization are established for a defined purpose which objective can only be seen or shown to the world by the output (product) it produces. For there to be an output the most necessary is the input. Inputs do not come for free; payments have to be made on them. Taking the Nigerian Bottling Company (NBC) as a case study, it needs inputs in the form of raw materials, labour etc. to produce goods (soft drink) and payment must be made for these inputs, this boils down to cost.

1.2 Statement of the Problem

In the past, many companies have witnessed considerable lapses and increasing changes in management disciplines. Costing an important element in the overall operation of an organization through the provision of relevant information about cost is one of the problems organizations are facing. Because there are no satisfactory requirements to maintain detailed cost records, some small firms keep only traditional financial accounts and prepare cost information in an ad-hoc-fashion. In all but small firms this approach is likely to be unsatisfactory.

There is a vast range of systems in operation ranging from simple analysis to computer based accounting systems incorporating standards, variance analysis and the automatic production of control and operating statements. These different costing methods are meant to suit different organization the adaptation of the wrong method, for a company will constitute a problem instead of a solution. Also poor or inadequate knowledge of a particular method of costing has constituted problems for many firms.

Most companies are still using the simple analysis system to set cost while some companies do not even have a costing system. This no doubt has led to poor planning, control and decision making.

1.3 Objectives and Purpose of the Study

This project is designed to provide a clear and concise understanding of the importance of costing to the manager in carrying out his/her responsibility for planning controlling and making decision which will lead to achieving certain goals. This research work aim to highlight that costing is

  1. Indispensable in determining the cost per unit of a product.
  2. A factor in pricing decision, production planning and cost control.
  3. An important tool in running a section, department or factory, that is, organizational planning, decision on alternative methods, wages cost control and material cost control.
  4. Important in profit planning, make or buy decision etc.

1.4 Research Hypothesis

H0: Cost Accounting is not an indispensable tool in management planning, control and decision making.

H1: Cost Accounting is an indispensable table in management planning control and decision making.

1.5 Significance of the Study

It is the desire of any management to maximize profit to boast of high profit all expenses incurred must have to be deducted from turnover; whether profit will be low or high largely depends on how much deductions (expenses) will be. Excessive cost reduces turnover excessively this in turn reduces profit. This project which is centered on the importance of establishing adequate and proper cost for production will

  1. Be of immense contribution towards helping managers to determine proper cost for organizational operations
  2. Help managers and others in industry, commerce, local authorities and similar organization to gain a working knowledge of the principles and processes of cost.
  3. Enable managers to analyse, select and implement the principle, techniques and method that best suit their firm.

1.6 Scope of the Study

This study covers a general review of the different methods and techniques of costing and how cost accounting affects the planning, control and decision making process of an organization using the Nigerian Bottling Company (NBC) as a case study.

1.7 Historical Background of the Firm

The Nigeria bottling company [NBC] was incorporated in November 1951, as a subsidiary of the A.G Leventis group with the franchise to bottle and sell coca-cola product in Nigeria. From a humble beginning business, the company has grow to become a prodominant bottler of non-alcoholic beverages in Nigeria, responsible for the manufacture and sales of over 33 different coca-cola brands. Other popular brands of beverages produced by the company are Eva water, Five Alive fruit juice and the newly introduced Burn energy drink.

Coca-cola, the product that gives the world its best known taste, was first set up in Lagos, Nigerian in the year 1953. This became the beginning of an exciting story of growth and development particularly in the recent past.

The company presently has 13 bottling facilities and over so distribution warehouses located across the country. Since production started, NBC PLC has remained the largest bottler of non- alcoholic beverages in the country in terms of sales volume, with about 1.8 billion bottles sold per year making it the second largest market in Africa.

Other products by the Nigerian Bottling Company (NBC) include Fanta orange, Fanta Tonic, Fanta Apple, Soda water, Fanta pineapple Sprite, Bitter Lemon and Coke etc. All of these are one of the most selling drinks in the country and worldwide. In addition, it is today Nigeria number one bottler of soft drinks selling more than 7,000,000 bottles per day. Currently, there are about 20 plants in various parts of the federation and more are yet to come.

Chapter Five

5.0 Summary, Conclusion and Recommendation

5.1 Summary

In the past, a lot of organisations (hospitals, manufacturing, schools, travelers etc) have witnessed considerable lapses in management, loss of profitability, liquidation and the likes. Whether an organisation succeeds be it a profit making or non-profit making organisation it needs a sound management to plan its activities, assign lines of responsibility to the various office holders and departments. Design an internal control system which will ensure that planned objectives will be achieved, by ensuring that plans go as they are set and where deviations exist detect their causes and recommend corrective action. Decide among various business or investment opportunities which is must profitable by making proper analysis between its cost and future returns. Identify alternative options so that production does not break-down or profit margin dropped because of a choice sways from the original plan since the future cannot be accurately predicted.

Cost accounting gives idea of what cost will be by making data available to the management about materials cost, labour type and cost product line and their contribution to the overall profits. What overheads will be, the time need for the production of a unit per product and the total time required. The cost of idle time and the overall cost of operations. This helps management to plan in as a way that the least possible costs are incurred while producing the most or highest quality goods and services. It thus encourages efficiency, economy and effectiveness of management.

5.2 Conclusion

Cost accounting is an important management tool that aid management in planning, control and decision making. A sound costing system is therefore vital to any organisation. In the recognition of the fact stated above and from the information derived from the staff of the Nigerian Bottling Company (NBC) Kaduna branch the following conclusion are given

  1. Costing accounting gives complete knowledge of cost which helps management to make pricing decisions.
  2. It studies cost behaviour with or at different production level for profit planning decision, make or buy decision etc.
  3. It gives management the picture of the type of labour force that is required for what type of product, the amount of labour and at what cost.
  4. That for any organisation to achieve its objectives it needs a sound cost accounting system to prepares adequate, timely, accurate and relevant information about its operations and activities.
  5. Various methods of costing exist for an organisation to enjoy the full benefits of costing it should adopt the method that best suit its operations and apply it consistently.
  6. Variance analysis is very crucial if management desire to attain goals. Plans are made today for events which will occur in the future. Today is known with perfection but the future can only be assumed and assumptions are not always right. Cost accounting prepares budget by which actual occurrences can be measured and where deviation exist adequate corrective measures can be taken.
  7. Cost accounting is the bedrock of any sound management in any organisation, government or private, service rendering or manufacturing.

5.3 Limitations of the Study

There are a number of obstacles, which limit the work of this project among these are inadequate resources, which is limited compared to its demand.

Costing in this research is limited to its use in planning, controlling and decision making although costing applies to more than these three.

The data used to find relevant information contained in this research findings is limited to just a company and with this not the entire company but a branch.

Costing also applies to all organisations but the data given in the research is mostly related to a manufacturing kind.

5.4 Recommendation

Based on the findings in chapter four with regards to this topic “Cost Accounting and its Application to Planning Control and Decision Making.

The following is recommended.

  1. Every organisation should possess on efficient and effective costing department.
  2. An appropriate costing method and technique should be identified by the Cost Accountant and this should be implemented and properly controlled.
  3. With the advancement in technology crude method of operations are fastly fading out. Computerized cost accounting is very efficient (as can be seen from the response from the Nigerian Bottling Company Kaduna branch) in generating and providing management with relative and timely information.
  4. The system in operation should be fully understood by all members who are charged with the responsibility of operating them.
  5. People charged with cost information must be knowledgeable in cost and its analysis so that information produced by them can be accurate or nearly perfect. Competent people should be employed.
  6. Plans should be closely supervise so that deviations can be identified on time. This will help the management to quickly take corrective measures before plans are adversely affected.
  7. Cost accounting should not be limited to just the accounting fields and related business courses. It should be studied by all people in all fields so that overall cost of both the economy and individuals and businesses can be kept

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