THE EFFECT OF PRODUCTION COST CONTROL IN MANUFACTURING INDUSTRY

1.0 Introduction

It is paramount that the feature of every organization is the pursuit of a goal or objective and this target exists in different dimensions, but it is evident that every manufacturing organization whether sole proprietorship, partnership, corporations among others must have an objective and the primary objective of those organization is to maximize profit. Any other objective such as social services is purely secondary and generally dependent on profit. It must have control over the cost of production and services.

Manufacturing is the transformation of raw materials into finished goods through the use of labor and factory facilities. It is clear from this point of view that currently, the prices of materials are so exorbitant to the extent that manufacturing companies are in a serious profit squeeze. They are struggling to maintain satisfactory earnings in a situation where costs are rising but some industrialist contend that profit increase are becoming more difficult to obtain even at lest proportionate degree to cost foreign and domestic companies as well as government efforts to prevent further inflation put serious restraints on additional increase in a profit.

In addition to these the government (both state and federal levels} stabilization measure aimed at restructuring and improving the economy and their attendant cost effect. Some of these measures like the second tier foreign exchange market (SFEM) and structural adjustment programme have had the effect of not causing increasing price due to cost of input but have gone further to multiply in built imported inflation by incremental exchange ratio of the naira the convertible currencies use In importation. These governmental structural re-adjustment have contributed to a great extend in rendering most profit seeking long range plans of companies in effective.

Thus, most of these companies are compellent by the prevailing economic circumstances to be more interested in research and development for the expansion of profit margin of the already existing products.

This role as well helps them to event diversification, thus , this quest for increase profit margin the high of the near fixed nature of revenue implies that the achievement of some depends of product management of cost.

So to maintain the level of earning or to increase earning, following these situations, many companies taking drastic measure to control , if not reduce cost,do away with waste and increase productivity at all ebbs. The industrial revolution which brought about improvement and technological technics do help to control and reduce cost but are in most cases not adequate.

The purpose of this research work is examine the various cost control measures being used in manufacturing companies like PZ Cussons Nigeria Limited as a case study, the consequences of these reasons and to propose courses where and if necessary. The choice ids because PZ Cussons Nigeria Limited is involved in the manufacturing of a product faced with the indiscriminative rise in price of their products which is attribute to the cost of production.

1.1 Background Of The Study

This project which has its title as the effect of production cost control as a case study of PZ Cussons Nigeria Limited. PZ Cussons was founded in 1879, as a trading post in Sierra Leone by George Paterson and George Zochonis as Paterson Zochonis. The British owned company expanded its operations into nearby Nigeria before the end of the 19th Century. PZ Cussons Nigeria Limited is a major manufacturer of personal healthcare products and consumer goods. It operates worldwide, especially in Africa and commonwealth nations. Their products include imperial leather soaps, Shampoo, Gels, Milk, Olive oil, detergents, healthcare products, cosmetic products, Venus range of hair care products etc.

This topic The effect of production cost control is to find out (If there is any) effect of production cost control in the PZ Cussons Nigeria Limited. Based on this ground, the necessity of production cost control has brought about this research which was undertaken to give actual background on his control of cost also in order to achieve this aim in a manufacturing organization employing PZ Cussons Nigeria Limited. One can come to an inevitable conclusion that cost can be controlled in material, labour and overhead in a firm and also uncontrolled production cost too can lead to skyrocketing price in goods or products of the firm and even their services which affect the growth of the firm and operating expenses as well.

1.2 Statement Of The Problem

PZ Cussons Nigeria Limited is facing a lot of problem in their manufacturing industry. But here, I will mention few important problems that are falling on them that need to be looked into before it causes either break down of the company or mark the end of the company. The main problems are stated below:

1. Inadequate raw material: One of the major problems PZ Cussons Nigeria Limited face is insufficient or lack of raw material raw materials. Sometimes the make use of foreign materials that are not available in Nigeria, which delays them from producing the normal quantity they are supposed to produce in a mouth.
2. Non Employment of skilled labor: This is another major problem that PZ face. They are supposed to employ skilled laborers or experienced laborers which help in improving their products, thereby making them to produce products that have high quality.
3. Poor management: Every company facing this problem easily breakdown if immediately effort is not put. And it is one of the problems PZ Cussons Nigeria Limited face.
4. Balancing maintenance with throughput: Throughput has to do with output. PZ Cussons face the problem of balancing the cost of keeping equipment functioning is and increase in throughput to ensure customer satisfaction with delivery lead time.
5. Environmental concerns and considerations: Local environment and employee, environmental regulations can be expensive.

1.3 Objectives Of The Study

The sole objectives of this study are:

1. To examine the cost control system in operation of PZ Cussons Nigeria Limited.
2. To evaluate them as to their effectiveness or otherwise.
3. To find out all the inherent deficiency.
4. To make recommendation for solving identified problems possibly improve and update any absolute technique line with recent trends.
5. To find out the effects of production cost on the price of a product, growth of the firm and the operating expenses.

1.4 Research Questions

• What is the type of company you run?
• What is the costing method employed by your company?
• How often are production cost budget prepared in your company?
• What is your position in the company with respect to decision making?
• Do you use production cost to determine the price of your products?
• Is there any other factor apart from production cost that affects your production cost that affects your products price fixing?
• In your company is there any relationship whatsoever between price and production cost?
• Do you record much gain at a slight decrease in your production cost?
• Are your priced fixed internally by the management?
• Has production cost affecting your growth of expansion in recent years?
• Is there any other factor that hinders your growth apart from increase in production cost?
• Do you include production cost as a part of your operating expenses?
• Are there other factors that increased your operating expenses?
• Do you think that your Management applies effective control mechanism to your operation in the firm?

1.5 Statement Of Hypothesis

The study of production cost control can be done using the formulated hypothesis below:

Ho: Production cost has no significant impact of the price of a product.

Hi: Production cost has a significant impact on the price of a product.

Ho - Uncontrolled production cost does not affect the growth of the organization.

Hi - Production cost affects the growth of the organization.

Ho - Uncontrolled production cost does not increase the operating expenses of the firm.

Hi - Uncontrolled production cost increases the operating expenses of the firm.

1.6 Significance Of The Study

It is a fact that production cost constitutes the major proportion of operating cost is manufacturing organization. Therefore, for such manufacturing company to survive, grow and pay its shareholders by making reasonable profit, the effective and efficient control of such a cost by management become very vital.

The significance of studying the effect of production cost control in PZ Cussons Nigeria Limited is that the result will help other manufacturing companies to identify the exact problems affecting their production cost control. For students who would wish to research further on this topic, it will give them a due on what goes in the industry prepare their minds on some hardships to be encountered and also limit their research.

1.7 Scope Of The Study

Although there are many manufacturing companies in existence in the country, but because it is not all possible for the researcher to cover and coupled with time and financial factors constraints.

This present study is designed to cover only one manufacturing company PZ Cussons Nigeria Limited. It is believed that what is detained in PZ Cussons Nigeria Limited will be applicable to other Manufacturing Companies.

The researcher, while trying to obtain information from respondents encountered certain drawbacks which hindered data collection. The reluctance of some officials to grant audience during the course of this study was a stumbling block in the way of a key officer to release all the information that required figures, which he took to be sensitively secret and confidential, posed a serious limitation to the study.

1.8 Limitations Of The Study

• Insufficient Literature Materials: The greatest hindrances of this project work are the lack of adequate reference material for this work to be effectively carried out by the researcher.
• Poor Responses: The response of people during interview was very poor and there were incomplete to that it is confidential speak on such issues or they should tell you that it is confidential as a result of this information was not let out easily.
• Finance: Due to fairness from school to the company, it cost so much money for transportation thereby causing some backwardness for the researcher to complete the project in time.
• Time Factor: This also the greatest hindrances of this project work are the time factor which affects the researcher from her studying. Some official will tell you come today, come tomorrow, not knowing that everything is time. While trying to obtain information from respondents encountered certain drawbacks which hindered data collections. The refusal of a key officer to release all the information that required figures, which he took to be sensitively secret and confidential posed a serious limitation to the study.

1.9 Definition Of Terms

Cost Centre: A cost Centre is defined as a location, person, or item of equipment in respect of which cost may be ascertained or related to cost unit

Cost: The amount of expenditure (actual or notional) incurred on or attributed to specified thing or activity.

Cost Units: A quantitative unit of product or service in relation to which cost is re-ascertained.

Control: Control is the monitoring of activities to see that organizational goal and objective are achieved as planned. It is a measurement of the set out goal of a firm to achieve an aim or objective.

Manufacturing Organization: It is defined as the industry that turns primary product into finished goods.

Manufacturing: Manufacturing is the transformation of materials into finished goods through the use of labor and factory facilities.

Budgetary Control: This is the establishment of department budget relating the responsibilities of executives to the requirement of a policy and the continuous either to secure by individual action the objectives of the policy or to provide a firm basis for its revision.

Production: Is a process of combining various material inputs and material inputs (plans, know how) in order to make something for consumption.

Production Cost: This is cost incurred by a business when manufacturing a good or producing a service. Production costs combine raw material and labor. To figure out the costs of production per unit, the cost of production is divided by the number of units produced.

Product: This is anything that can be offered to a market that might satisfy a want or need. In manufacturing products are bought as raw materials and sold as finished goods.