The Effect Of Cost-Control In The Profitability Of A Business Organisation (A Case Study Of Nigeria Bottling Company, Ilorin Plant)

The Effect Of Cost-Control In The Profitability Of A Business Organisation (A Case Study Of Nigeria Bottling Company, Ilorin Plant)

Chapter One

Introduction

1.1 Background of the Study

One of the means of measuring the performance of an organization’s management is its efficiency. Efficiency reliable to the optimum utilization of inputs to derive the best achievable outputs.

An efficient manager executes his responsibilities with the last resources and maximum output to accomplish the organizational goals.

An important goal of a profit oriented organizational is to operate at a profit. However, if how effort to generate maximum revenue is not cost efficient, it will only be more difficult to achieve the goals. As strategies are employed to maximum returns on one hand, it is of equal importance for the management to institute conscious and methodical programmes that would assist in controlling and reducing the resources input in order that the revenue will not be totally consumed by astromical expenses.

We thus discussed the two techniques that could assist management to maximize cost namely: Cost control and Cost reduction techniques. For the purpose of this study, we shall call then cost management techniques (CMS).

We viewed cost control to be an application of costing to enable management to compare actual cost with planned cost and to take any necessary corrective action before it is too late.

Before any control can be affected, standard or target of performance must be set against with actual cost can be measured, through this method inefficiency will be revealed.

Cost control can also be viewed to be an exercise in good house keeping that is avoiding a wasteful use of valuable resources and encouraging efficiency and cost consciousness.

In contrast, coat are too high, through cost control might be good cost.

Cost reduction, therefore is a planned and positive approach to reduce expenditure. These cost management techniques cost reduction.

Therefore is a good planned and positive approach to reduce expenditure.

These cost management techniques (C.M.T) could be utilities extensive by profit oriented organizations producing goods and service, provided that the economic and political climate is stable for growth.

1.2 Statement of the Research Problem

This topic for this project is cost control and reduction techniques. Due to the lack of enough time, the research work is average. In the case, the various research problem formulated are in question forms.

These are.

1. What is the historical background of cost control and reduction techniques?
2. What are the reasons for recent cost control and reduction
3. Does the recent cost control and reduction have any prospect for kwara property development corporation (KWPC)?
4. What are the likely problem facing cost control and reduction directions to KWPC?

1.3 Objective of the Study

The research objectives of the study therefore are to:

1. Identify, if any cost management techniques currently employed in property Development Corporation.
2. Apply cost management techniques to the area of interest.
3. Determine the optimal level of construction cost Nigeria
4. Examine the effect of constitution. Cost information cost management techniques C.M.T
5. Give an overview of constitution cost factors in Nigeria.
6. Evaluate the effects of delayed payment on the construction study

1.4 Significance of the Study

The study will shed more light on benefit to the professionals like architects, quantity surveyors and accountants. It will enlighten and bring about improvements.

The study will enlighten so many institutions to improve and not close town because this is an era of sky rocketing prices and inputs and unlike in the past, may commercial organizations and finance houses have closed down, below acceptable capacities due to high cost of inputs.

To survive therefore, it is not enough to deal with revenue aspect alone but also to keep costs an expense as minimal as possible.

The study will also give us more insight on invaluable assistance of the research work to NIGERIA BOTTLING COMPANY and other commercial organization involved in construction work. Human wants are unlimited and resources available are both disproportionately scare and also have alternative and competing uses. The situation is aggravated for a corporate body whose native now depends on the unstable and highly inflationary Nigeria economy to compute with this complex situation, the best has to of scare resources available.

1.5 Research Questions

The research questionnaires basically derived from the purpose of the study. They are formulated from relationship between variable or effect of one variable of one variable upon another.

The focus of this study by research work to identify cost control and reduction techniques in NIGERIA BOTTLING COMPANY. Hence, in the course of this study, effort has been made to find solution to the following research problem.

1. What is the impact of cost control and reduction action in Nigeria bottling company?
2. What are the various cost control and reduction techniques used in the Kwara State Property development corporation?
3. What are the benefits that accrue to Nigeria Bottling Company through the adoption of cost control and reduction techniques?

1.6 Scope of the Study

The scope of this research work is limited to Nigeria Bottling Company due to time constrain and unwillingness of the respondent in Nigeria Bottling Company.

More so, literature was reviewed on cost control and cost reduction technique and it was covered by the scope of the research work.

1.7 Limitation of the Study

This project is limited to the natures of the data available at the case study which tends to place more emphasis on historical matters in the constantly enlarging aspects of the economy.

However, the research work has faced some constrain as like time, lack of recent and adequate material unwillingness of the respondents and the case study, to give true replies, lack of corporation of the case study.

Limitation did not hinder effective completion and equally of the research work.

1.8 Organization and Plan of the Study

The research work will be divided into five chapters.

• Chapter one will have the background of the study, statement of the research problem, objectives of the study significance of the study, study plan and definitions of key terms.
• Chapter two will treat cost control, cost reduction, effective cost control value analysis and engineering and appraisal of literature review.
• Chapter three will discuss brief history of the case study, modes of data collection and analysis techniques.
• While chapter four will contain introduction, data presentation, data analysis and findings.
• Finally, chapter four will discuss the summary, conclusion and recommendation.

1.9 Definition of Key Terms

Costing:

It is the technique or a process of ascertain cost. This is due cost which can be influenced by the action of a member of an organization and it is relevant to decision making and very important in measuring operational efficiency.

Budget:

Is a financial and quantitative statement prepared and approved prior to a defined period of time of the policy to be pursed during the period for the purpose of attaining a given objective.

Cost Behaviour:

In relation to volume of activities is a measure of degree of responses of a cost item to a small charge in the level of activity.

Cost Centre:

It is a location person or items of equipment in respect of which cost may be ascertained and related to cost unit for control purpose.

Chapter Five

Summary, Conclusion and Recommendations

5.1 Summary

Nigeria Bottling Company

Is the principal state agency charged with the responsibility for stimulating residential and industrial housing development as well as in adequate finance arising from the fact that as not been capitalized enough to operate as a variable entity. Its financial problems are further compounded by the stoppage of the state government monthly subversion earlier enjoyed.

Therefore, with the shortage of fund and the constraint posed to its activities by the rapidly cost of building materials, it becomes imperative to improve upon it current standard of cost control and cost reduction programmes. Cost of materials and fluctuation in prices and rates are the two most cost in Nigeria. Also, the main importances in the regard are delays in payment which lead to cost over run. There are compensable, non excusable and exercisable delays and specification. Change a in scope of work leading to suspension of projects, failure of disposed vital information to contractors, late delivery of materials and failure to finish contractors with appropriate sites by agreed data.

Information

Information is the basis for making business decision and the degree of its accuracy affect the level of confidence that will be attached to the subsequent decisions. The need to forecast and control construction activities necessitate efficient cost information management especially in this time of economic recession.

Privitalization and commercialization of Nigeria economy has been in process to improve the efficiency of the industry and utilize private sectors managerial techniques to achieve growth and development of the public sector.
This has not been possible at the construction industry because of the following reasons.

1. Nigeria economy is just towards acquisition of technological know now. Therefore, rolling back supervision of major parameters.
2. The economy is mono-product based which depended on the importation of both capital goods and raw materials needs in the construction industry. These are input that depends on foreign exchange rate and its availability. It is rather unfortunate that these one virtually unstable. The exchange rate is rather high bringing down the purchasing power of the naira by the day.

5.2 Conclusion

Having studied the cost management techniques of the corporation, with the background of an unstable Nigeria economy, we may conclude as follows.

1. There was no cost control and cost reduction techniques that could be appreciated in the light of the magnitude of its operations.
2. The determination of an optimal level of construction cost was not considered to be important by the management.
3. Budgeting discipline was existed
4. The legal aspect of drawing contractual agreement as it related to delayed payment, extension of project time and contract price variance were not considered properly.
5. The method of classification cost could not enhance an effective cost management programme and the value of cost information processing was not appreciated.
6. Formulation of standard was done in such a way to allow sudden changes in economic environment to derail whatever construction control programme might be existing.

5.3 Recommendations

The issues addressed in this research work have been the identification of cost management techniques that are useful in the construction industry and analysis of technical and professional problem confronting the efficiency of our techniques.

In the light of the study, the following recommendations are made:

1. Construction cost may be greatly reduced when specification for each project are well written.
2. Source of relevant and accurate cost information should be identified and considered properly by the professionals in the industry, who should also understand that the principle of information dissemination and professionals in the industry who should also understand that storage for sound cost management programme formulation are important.
3. Corruption clause should be inserted in contract certificate empowering the client to terminate the contract on grounds of proven corruption: This will minimize the Nigeria factor which has disoriented the citizens to honestly and integrity.
4. Cost index approach to setting standard could enhance realistic cost estimate for the purpose of budgeting and also an efficient budgeting control system.
5. Finally, a memorandum of performance could enhance better understanding between government and corporation in order that the commercial objective of the corporation be placed in proper perspective.

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