TABLE
OF CONTENTS
CHAPTER
ONE
1.1 Introduction
1.2 Statement
of the research problem
1.3 Objective
of the study
1.4 Statement
of Hypothesis
1.5 Research
Methodology
1.6 Scope
and limitation of the study
1.7 Significance
of the study
1.8 Definition
of terms
CHAPTER TWO
2.1 What
is control?
2.2 Purpose
of control.
2.3 Division
of control
2.4 Basic
Element of control
2.5 Cost
control
2.6 Cost
2.7 Cost
and expense
2.8 Purpose
of cost studies
2.9 Cost
center
2.10 Cost
unit
2.11 Element
and classification
2.12 Other
cost of classification
2.13 Cost
control techniques
CHAPTER
THREE
3.0 Research
Design
3.1 Research Instrument
3.2
Method of data collection
CHAPTER
FOUR
4.1 Research
hypothesis
4.2 Research
of findings
4.3 Research
of data analysis
CHAPTER
FIVE
5.1
Summary
5.2 Recommendation
5.3
Conclusion
Reference
Appendix
CHAPTER ONE
1.1
INTRODUCTION
A
business can be defined as the sum total of those activities that have their
main purpose of creations, maintenance and extension of a concern, with
continuous to exist because it earns profit or than benefits.
Business
is set-up to achieve certain objectives, these objectives may range from
maximum of the organizer, wealth, rendering of certain essential service to the
community, capturing of larger share of market for it product or services to
maximization of profit or minimization of cost.
In
achieving these goals, resources inform of human and material have to be employed these resources employed are
measured in quantitative term and then translate them into what is known as
cost.
A
rational businessman has in his mind apart from other aim in his business
undertaking, the maximization of profit and minimization of cost. But the
business operation environment is dynamic and complex. Some factor, internal
and external, may affect the cash flows position of the firm and possesses a
threat to the going concern intension of the organization of the business.
1.2 STATEMENT OF THE RESEARCH PROBLEM
The major
problem of this study is to find out the effect of cost and reduction of
maximization of cost. Undoubtedly, it will lead to decline in operating profit
or low return on invested capital and gradually culminate into cash flows or
liquidity problems.
A continuous
high operational cost with less revenue will have adverse effect on the break
even position of an organization.
In view of the
above, there will be need to put in place an effective operational and control
strategies to overhaul and revamp the operational performance of the business
so as to have stable and stand financial
stand.
Although,
strategies is never set where a business has no problem of any form, but it may
be set to improve the operational standard of a business enterprise.
There are many
strategies that can put in place to solve business problem. Among the
strategies for solving business economic problem are the cost control and cost
reduction is used to achieve the corporate objectives.
More so, the
cost control techniques have the broad objective of curtaining cost within a
predetermined target but cost reduction is an active and dynamic concept that
attempt to extract more from the factor of introduction without loss of effectiveness.
It also aims at reducing costs from accepted standard and at the same time
maintaining the effectiveness of the product or services. Strategies in
business organization.
Also, the
problem of the cost reduction in economics of Nigeria business organization and
the effort made in solving economic problem of the cost reduction in Nigeria
business organization.
However, the
fulfillment of this intension in totality is very subjective and unrealistic as
a result of inevitable environmental factor which have direct or in direct
impact on the business.
The
environmental to have effects on the cost structure of organization, they are
determinant of the operational cost of activities or service being carried out
by a business enterprise as they influence more or most significantly the
management policies.
For example,
taxation, which is one of the government fiscal policies in the annual budget,
will in no doubt, have effect on the operational cost of a company. This is one
of the operating environmental factors and it is uncontrollable by the
management of a business.
More so, the
organization and operational policies of a company will have favorable or
adverse effect on the cost structure of such organization.
Therefore, an
incessant increase in the operational cost will negate the aim
However, the
success of this strategy will depends on the style of planning the business
uses. The inability of a company to encourage “GAOL CONGRUENCE” is one of the
associative problems militating against the successful employment of these
schemes.
In attempt for
an organization to achieve its goal for satisfaction of individuals in the firm
must be created. The achievement of goal congruence requires consideration by
the firm, a broad range of human need in additional to those that can be
satisfied by economic rewards.
Where the above
cannot be achieved, the effects of cost control and cost reduction scheme might
not augur well for the business, therefore, cost control and reduction strategy
must be meticulous used and implemented on achieving the desired objective of
the schemes.
The techniques
involves the strategies shall be fully considered in the subsequent chapter.
1.3 OBJECTIVE OF THE STUDY
The
purpose of the research is to find out what are the effect of the cost control
and cost reduction strategies on the overall performance of a firm. It will
reveal the short-coming in these strategies for solving business economic
problems.
The
research will also attempt to define and explain the meaning of cost control
and cost reductions, the technique involves as well as the different in their
applications.
However,
the result of the research will serve as a single guide to policy makers in the
business organization in taking decision as regard to thus topic.
1.4 STATEMENT OF HYPOTHESIS
Cost
control and cost reduction strategies do not lead to achievement of corporation
objectives and cannot be used to solve business economic problems.
Hi: Cost control and reduction
strategies can be used to achieve corporate objective and also used to solve
business economic problems.
Hi: Cannot be used.
1.5 RESEARCH METHODOLOGY
In the course of
the research, both primary and secondary data will be used; some companies will
be used as a case study in the research project.
The secondary
data will be got from annual report, audited account of the various companies
and other various publications relevant to the study.
1.6 SCOPE AND LIMITATION OF THE STUDY
Due to time and
financial constraint only few companies will be used for the research and
questionnaires will be serving on the companies. The companies will be selected
warmly from the different sector of economy.
The scopes of
cost reduction embrace activities of the entire company, from production to
marketing and at all level with the organization from the operation to top
levels. Cost reduction effort may include the following
a)
MATERIAL
COST:
I.
Quantity discount or cash discount
for early payment to supplier may be negotiated at favorable discount rates.
II.
Inventory control policy might need
improvement
III.
Value analysis may be carried out
IV.
Procedures for reducing material
wastage in production should be instituted.
b)
LABOUR
COST
I.
Labour efficiency may be improved
by work study.
II.
Unit labour cost and unit overhead
cost may be reduced by having production efficiency rewarding plan with the
employees
c)
FINANCIAL
COSTS
I.
Where there is the desire to allow
for discount, it should be done on a regular basis.
II.
Bank overdraft expense may be
better reduced by effective cash monitoring efforts.
d)
RATIONALIZATION
MEASURES
I.
As a company expands in activities,
there may be duplication of effort in the different face of it operation.
However, this duplication can be removed by ensuring that resources are
concentrated in the firm and this is referred to rationalization effort, which
is aimed at cost reduction that brings about efficiency at the workplace.
1.7 SIGNIFICANCE OF THE STUDY
At
the end of the research, the effect of excessiveness in the use of cost control
and cost reduction strategies in an operation will become clearer.
The
management will always take cogitation of other option in evaluating solution
to business economic problems.
Also
the problem, which can warrant the use of the two strategies, will be discussed
and alternative strategies which management can adopt in solving the business
economic problems will be taken in consideration.
1.7 DEFINITION OF TERMS
I.
Undue
Expenses: Undue expenses can be removed without having to
compromise the quality of this term of production or unit of services provided.
Consumers can only appreciate buying goods of better quality. Nonetheless, a
lowering of the standard may ensure the reduction of cost but at the expense of
the quality of goods.
II.
Management
Inconsistency: Cost reduction programme require the
support and commitment of the top management and this has to be on a regular
and consistent basis in order to avoid complacency not minding whether the
business climate is harsh or friendly.
III.
Resistance
to change by employee: Employee may want to react to
change negatively as a result of past belief on norms, this can be addressed by
ensuring that existing system or work environment situations are constantly
reviewed and friendly employee are involved at every stage in order to gain
their confidence and support with this, negative will be eliminated and cost
reduced
IV.
Faultless
system: A faultless system may be a desired one but effort
should be made to ensure that it is not over blown so that unnecessary controls
are removed.
V.
Avoidance
of elaborated procedures: Elaborate procedures of allowed in
a company may bring about costly operation at the expenses of ensuring that
employee capabilities are recognized which could lower cost.
VI.
Creative
Ideas: Since issue can be approached from different ways,
ideas and contribution from everyone involved in cost reduction programme must
be allowed for in order to eliminate wastes. Creative ideas can be enhanced by
ensuring that employees are given good incentive to work and the work
environment must be friendly so that any scheme put in place can be successful.
VII.
Areas
of cost reduction: For cost reduction activities to be
meaningful, the sources for incurring these cost such as finance, marketing,
production, human resources. Engineering, maintenance, etc need to be
considered in terms of the material, labour and overhead costs involved in the
area mentioned. There is need for using an integrated approach whereby cost is
not considered in isolation, but their inter-relatedness is given some consideration.
The manager is, therefore, expected to exchange ideas that will allow for goal
congruence to be attained.
VIII.
Maintaining
cost reduction: Reduction can be sustained or
maintained by ensuring that there is consistent control of costs in a place
with the aid of budgetary control techniques.
IX.
Communication:
Information to employee must be such that they are timely relevant, focused and
less costly. Information will be valued, where employees are convinced that
their future is guaranteed and prospect can be ascertained at the same time.
Good and equitable personnel manual must also be in place.
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