Cost Accounting Information And Price Determination
This study is designed to provide knowledge for costing information and price determination.
The need for cost accounting came with increased industrialization, engineering an expansion in manufacturing. It is therefore obvious that in efficient system of costing is essential for industrial control.
In period of boom, manufacturers are able to show profit notwithstanding the leakage which pass unchecked, but in periods of trade competition concealed inefficiencies have to track down and rigorous control must be exercised to ensure even modest margin profit.
There is not yet an agreed best method of costing products though it may be helpful to recognize that cost allocation are being used to obtain a mutually acceptable price and not necessary to portray caused and effect relationship of cost incurrence. But price determination from cost under efficient operation through efficient cost system will most probably approximate the price of the product to its value.
Accountancy has been defined by GLAUTER and UNDERDOWN, in their book titled “Accounting theory and practice as “a reporting activity that forms part of any management information system. In this regard, accountings is often explained as sciences of activities that are connected and form successive steps starting with observing, the collecting, recording, analyzing and finally communicating accounting information to its users.
The study of modern cost accounting yields insight regarding both accountants’ role and manager’s role in an organization because managers want to know how accountants measure performance and often depending upon accounting data for guiding their decisions.
Cost accounting has a major purpose of accumulating the cost of an organizations products and services. This aspect is regarded as product costing purpose.
1.1 Statement of Problem
A view shared by previous researcher on this topic that there has been a shortfall in the utilization of cost accounting information in some organization and their pricing policy decision making. It is right of this that this work attempt to suggest a good system which comprises a set of procedure, records and facilities that have to do with the systematic and routine compilation and dissemination of cost information and price determination.
Among the problems to be analysed are:
- To highlight on management inadequate concern over proper pricing guide through cost information.
- Necessary conditions for a costing system.
- Evaluating the present state of the application of the cost information in the determination of price.(iv) Appropriate basis of preparation of the cost.
1.2 Purpose of Study:
The purpose of this study will help to determine how cost accounting information is applied in an organization and how it is used in Price determination, what the researcher has learnt as theories is been put into practice in real life situations, relating to the cost accounting information and price determination. It help the researcher to see the practical application of the principles stated formally by the cost accounting and determining the cause of the short fall in its application and when applied, the advantages therein. It also helps to determine an appropriate condition and environment for prayer comparison and analysis of cost.
1.3 Research Questions
In this study, “Cost accounting information and price determination” (A case study of Nigerian Breweries Plc) the following research questions come to mind: They are:
- Is Cost accounting information used as a management tool for price determination in Nigerian Breweries Plc?
- Has the application of the Cost accounting information helped Nigerian Breweries to be efficient and effective in its operations?
- What other technique apart from Cost accounting information does Nigerian Breweries employ in decision making?
- Are these other techniques superior to Cost accounting information ?
- What problems do Nigerian Breweries encounter in decision making?
1.4 Statement of Hypothesis
- Ho: Cost-accounting information is not extensively used or applied in Nigerian Breweries Plc.
- Hi: Cost-accounting information is extensively used or applied in Nigerian Breweries Plc.
- Ho: The application of cost accounting information has helped in price determination.
- Hi: The application of cost accounting information has not helped in price determination.
1.5 Significance of the Study
This work is intended to be of benefit to processing business in general. It is hoped that by improving the profitability of hoped this study has benefited the economy as a whole.
Following the completion of work and the result made available to them, the processor will be in a position to re-examine their cost accounting information and price determination techniques and update them so as to enjoy these benefits available to firms with good cost accounting and price determination techniques and also avoid plugging their business into financial and operating difficulties.
Readers will appreciate other people’s view on cost accounting information and price determination and see the workability of this costing models and price determination system in real life situations.
1.6 Scope and Limitations of the Study
The scope of this study is restricted to the cost accounting information and its utilization in determining the price of products. should have intended to cover all the manufacturing industries located in different States of the Federation but the researcher intends to limit this topic to only to Nigerian Breweries Plc 9th Mile Depot, Enugu State due to time constraints, distance and financial handicap. The study of Nigerian Breweries 9th Mile Depot Enugu shall also serve other manufacturing companies in States of the Federation since the same techniques are applied in other companies. Therefore, the researcher will rely heavily on the Nigerian Breweries 9th Mile Depot since they have adequate information data relevant to the study.
1.7 Definition of Terms
(i) Historical Accounts:
These are financial statements prepared from past activities of the enterprise. Since these are actual figures of cost and revenue obtained in the past, management can determine the price of its product through it.
(ii) Cost Accounting:
This is an element of financial management that generates information about the cost of an organization and its components. As such, cost accounting is a subset of accounting in general.
(iii) Indirect Costs:
There are elements of cost that are associated with or caused by two or more cost objective jointly, but are not directly traceable to each of them individually.
(iv) Cost Control:
This is the regulation by executive action the costs of operating an undertaking particularly where such action is guided by cost accounting.
(v) Cost Centre:
Cost center therefore can be defined as a location, person or item of equipment (or group of these) for which cost may be ascertained and used for purpose of cost control.
5.0 Discussion of Findings, Conclusion and Recommendation
5.1 Discussion of Findings:
Assuming that the opportunity to increase and cutting cost is at the design stage, the cost accountant and the design staff should work in close collaboration, not only on new products but on old lines as well seeking ways and means of reducing the material cost by simplification of design, the elimination of unnecessary parts and by the use of suitable materials. The cost accountant should be wholly responsible for the supply of figures which measures the values of each idea and estimates of costs of new products.
This project “cost accounting information and price determination” is set out to highlight the importance of a good costing system in any organization, Using Nigerian Breweries Plc, Enugu as the case study file.
It is also the aim of this project to study in detail the course of the observed shortfall in the utilization of good cost accounting information system. Though cost structure is only one among other factors that influence price, but a good costing system which maximizes efficiency will place the organization on a sure footing among other factors. Efficient operation maximizes production, that is producing the highest possible quantity at the least cost.
For long manufacturers have recognized that pricing a product is one of the most important and complicated problems which they have to face in attempting to resolve this problem and in trying to find some general guideline by which to establish a sound pricing policy, they have agreed that cost is one of the factors which must be taken into account. The researcher wishes to make some recommendations. For a better utilization of Cost accounting information and price determination, these recommendations are as follows:
- For adequate cost control, the objectives or goals of the organization should be made known to the workers and they should be motivated to enable them pursue these goals such as profit maximization, growth and survival of the firm, cost minimization, sales maximization etc.
- The opinions of the subordinates should be sought in making departmental or firm’s estimate as this would inculcate in them a sense of recognition of their competence and importance by the management.
- Top management of the brewery must display their total commitment to the success of the brewery.
- Management must be well structured to make decisions that can be carried out. Hence decisions should be objectively made.
- Recruitment policy must take account of the need for specialists in operations. Recruitments of specialists enhances efficiency and effectiveness in operation.
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