The Importance of Cost Accounting System in Manufacturing Industries. [a Case Study of Northern Cable Processing Manufacturing Corporation (Nacaco)]

The Importance of Cost Accounting System in Manufacturing Industries. [a Case Study of Northern Cable Processing Manufacturing Corporation (Nacaco)]

Chapter One

OBJECTIVE OF THE STUDY

The aims and objective of this study are to evaluate the cost accounting system, which brings out the real situation and existence of an organization. It is aimed at the determining the level of adequacy of cost accounting in the organization’s production activities. Through evaluating the system, the efficiency or inefficiency of such system will come to light which will create opportunity for discussing the ways by which an organization can account for cost of production adequately.

Without excluding certain cost incurred during the production. The study is aimed at providing solution to the problems of process cost accounting in industries which one way or the others do affect performance within the industry. It’s aimed at analysis the relevant of cost accounting system an industry and providing solution weaker system.

CHAPTER TWO

LITERATURE REVIEW

DEFINITIONS

Cost accounting has been defined in a variety of ways with difference authors, but basically it is the systematic, recording of cost before and after the event of production and the employment of the information obtained for the efficient operation and control of the business. According to Li “we shall designate this new type of business event as resources transformation or cost transformation. It accounts for change in the form of resources due to event within the manufacturing process “the is a conversion involves sacrifices in he form of labour and manufacturing facilities as well as those on raw materials. Cost accounting is concerned with recording the scarifies at all stage, from the setting up of business to the purchase of raw materials, right thorough the sale and delivery of finished product.

Apart from the above definition, we can also define cost accounting as that part of management accounting which has responsibility of setting standards budgets, and at the end of the operation, the actual cost arrived at can be compared with the set standards. The comparison between at variance form the standard.

STANDARD COST

There is no general accepted definition of standard costing. A number typical; definition are given below and are followed by explanation and criticism.

H.E Kearsay (1968 page 41) defined standard costing as simply expressed, standard costing is a method of ascertaining how much costs should be and analyzing the causes of variations between how much they are and how much they.

Should be, alternatively, standard costing is a scientific methods of developing a comprehensive series of cost standard to cover the activities of a business of comparing actual cost against cost standards in such a way that the causes of variation are revealed to from a complete statement of profit and loss Kearsay certainly express the fundamentals of standard costing but made no references to a properly planned system.

C.T. Devine (1976 page 32) further went to define standard costing as “the purpose of standard cost in condensed form, are to find where inefficiencies exist, to find measures for these inefficiencies and to bring them the alternation of those who have authority to correct them.

“Again in the above definition there is no mention of the existence of a complete system.

According to C. Gillesspie (1972 page 24) standard costs completed to reflect specified quantities, price and level of operation. On type of standard cost is the predetermined cost of operation reflecting

Quantities of labour and materials expected to be used under goods performance.
Expected prices to be paid for labour and materials doing the coming your and
factory expenses to product based on good spending performance and practical capacity operation of the factory.

From the above definition of different writers a comprehensive definition of standard costing is deduced and which is generally accepted. Standard costing is a system of cost accounting which is designed to show in details how much each product should cost to produce and sell when a business operating at a stated level of efficiency and for a given volume of output. Through carefully planned and organized accounting procedure, the difference between actual and standard costs (the cost variance) are analyzed and them promptly reported upon to managers. The later in turn take corrective and preventive measures as well as employing the data for planning coordinating and control.

CHAPTER THREE

RESEARCH METHODOLOGY

DEFINITION

Research methodology can be defined as the systematic gathering recording and analysis of data pattering to the research project in order to find ways of solving that problem.

The use of research method often arise in scientific discipline when research is to be conducted in such filed. In addition to the above definition, the importance of providing sufficient information or research employed in the sufficient information or research employed in the readers of the result to evaluate the validity of the conclusion drawn and there by determine their relativeness to the operation used.

POPULATION AND SAMPLE SIZE

The population of the study is the junior, senior and management level of workers of northern cable processing manufacturing company (NOCACO) limited. In the following department.

production department
Administrative department
Engineering department
Customer care unit.
legal unit.
Transportation unit.

The total number of the population of members of the company used was 30.

CHAPTER FOUR

INTRODUCTION

ANALYSIS AND PRESENTATION

This chapter is trying to bring out the position of the organization used as a case study.

Through the analysis of the data gathered from the company, the company’s position can be easily determined.

The interview conducted in the previous chapter departmental thus, the writer was able to make analysis based open the same consideration during the interview.

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

SUMMARY

Cost accounting is that part of management accounting which establish budget and standard cost and actual cost of operation processes department or product and the analysis of variance, profitability or social sue of fund.

Cost accounting is also considered as the very managerial partner in the planning and control of activities, through this study has revealed that the major problem being faced by most of the manufacturing industries is the difficulties they do encounter in an attempt to account for the production incurred during the time the items were in process until it reaches its finishing stages and this is cause because of lack of cost accounting department in many industries.

FINDINGS

This study revealed that cost accounting system is existing in the hand of the general manager of northern cable processing and manufacturing company limited (NOCACO) using the computer, cost accounting data is manipulated during operation in order to ascertain records of production activities carried out within the company.

This has shown that the company does not have an independent department responsible for cost accounting. The production department was found to be managed some how adversely in that, labourers in the filed tilt that they were not being motivated towered the work they perform and as such efficiency was hampered.

The hours of labout sometimes remain idle due to breakdown of machines as a result of the maiming in such equipment and this has been a long existing problem of the company.

The company was only able to serve within the industry due to the fact that is almost monopolized the production of cable and harness within northern Nigeria and as well as due to emphasis laid by the company on quality control.

Although the element of idle time exist which is detrimental to the company, her position within the cable industry makes the situation less vulnerable to the attainment of the objectives of the company.

The planning aspect of the company contains some adverse considerations and the company does not make analysis as regards the adverse effect of the planning as regards control measures taken in curbing adverse variance. The standard established by the company has defects sometime and control measures establishment was geared towards operational aspect of the company activities. Managers responsible for operation were being queried for adverse occurring by the planning system of the organization and feel responsible for the control of uncontrollable cost which does not allow justice within the organization activities prevail.

Some of the key types of budgets were not in existence within the company that is some transaction carried out were not properly estimated for at the beginning of the period. The company accounts for process as well as job orders from customers. The used in accounting for the activities is the first – in first out (FIFO) method. It had the method in use despite the economic condition of the environment as well as the drastic change in the method of accountability, which could change from one method to another.

CONCLUSION

From the summary of the research findings, one can come to a decision as regards the operation of Northern cable processing and manufacturing company limited (NOCACO).

The company can be referred to as monopolistic firm operating within Northern Nigeria at a very high standard of efficiency due to it quality of output. Is considered as one of the producers of harness in Nigerian and much emplaces and control are geared toward attainment of high quality cables in production. Despite the nature of the 4 operation of the company the writer level of performance. To mention but a few are the absence of an independent department responsible for cost accounting as of the organization; the absence of a wall equipped maintenance section if the company equipment as a result of breakages although power supply problem was overcome with the installation of a power generating plant.

The conflict which exist in the improvement condition of services by the most potential resources of the company that is the labour force. The absence of an independent cost accounting department has resulted in some various approaches toward ascertaining costs and their control as well. The native or element used in apportionment of overheads were selected using expertise knowledge on cost matter and sometimes an inappropriate element or factor is used in the apportionment.

Some budgetary estimates were not in existence as at the time of study such as production budget in particular period of time estimated on some overhead within the organization the benefits of the use of break – even analysis is neglected by the company due to the fact that most of the companies attention was forecasted on quality as the alternative for beating competitor on cable production. National electric power Authority, Nigeria Telecommunication limited, Peugeot Automobile Nigeria limited and other lost of reputable companies patronize the company’s product for their various activities such as infrestural supplies etc.

RECOMMENDATIONS

In manufacturing industry most of the companies found within such industry establish cost accounting department which becomes as responsible for action regarding production cost and controls. Northern cable company limited (NOCACO) was one amongst their absorbed into financial department of cost accounting responsibilities were found with the general manger.

The writer is therefore recommending for re-establishment of cost accounting department and a professional expert in cost accounting department and professional expert in cost accounting be employed to head of the department. Although the employment of an expert involves cost but the benefits to be derived from the presence of the expert will out weight the cost incurred. The writer is strongly advising the company to try and have cost accounting department in existence. The existence of such department should be cover all the cost accounting activities and apportionment of factory overhead such as materials, labour machine prime cost percentage rate be used in orders to absorb overhead proportional rate used in order centre benefit derived form the use of such overhead in relation to job orders produced variance analysis must of beyond operational factors but must include the company’s planning factors which shall direct measures of control adrese variance to wards the right direction. The operation section cannot only be held liable for adverse result in that source adverse are as result of the planning situation within the company.

NOCACO should try and incorporate the break even analysis with the operational activities and measures of control. This will help the company in knowing the level of output which break – even after if might have been sold out. This determination of break-even will enable the management realize the level of activity that yields profit commence and most importantly the level at which such yielding profit commence.

The company should embark upon the training of its staff in order to improve the efficiency and effectiveness if work performed within the company, it should try to have in existence a maintenance department well equipped to maintain the equipment within the company.

This will definitely arrest the losses occurring as a result of breakdown of machines causing idleness which increase cost of production.

References

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