THE EFFECT OF COST CONTROL ON PROFIT MAXIMIZATION (A CASE STUDY OF NIGERIA BAG MANUFACTURING COMPANY) PLC, IGANMU LAGOS STATE

CHAPTER ONE

INTRODUCTION

1.1       BACKGROUND OF THE STUDY

            Cost control is a vital element in the management aspect of functional activities that covers all aspects of an enterprise.

            It was first performed in a routine manner by clerks, but with the advent of professional management skills, it has evolved in to a more sophisticated function with a far reaching effect on a company’s profit.

            This study will critically examine the constituents of cost management, such as production cost and control, purchasing cost and control, marketing cost and control, and other non-manufacturing cost and control.

            Various cost control techniques will also be highlighted to provide the management of Nigerian Bag Manufacturing Company a pool of casting techniques that will assist them in maximizing profit.

1.2       STATEMENT OF PROBLEM

            This research work is of immense importance to all organization. It tends to focus attention on the following areas;

1.     In adequate allocation of the company’s’ budget in expressing company’s policy on programme.

2.     In adequate / inaccurate yardstick for checking whether the services of agent distributors or middle men will be more economical than direct sales.

3.     The company’s budget did not set accurate standard which performance can be measured against.

4.     How to gain maximum utility from the staffs as a way of improving productivity and maximize profit.

1.3       OBJECTIVE OF THE STUDY

            This research study is directed towards enabling management of Nigeria Bag Manufacturing Company to know the importance of cost control and its effect on profit maximization. It provides the management with the following;

1.     To identify the role of costing as an instrument for expressing company’s policy or programme.

2.     To find out when agents, Distributors and other middle men will be more economical than direct sales.

3.     To determine a more cost reduction strategy’s in a company’s operation.

1.4       THE SCOPE OF THE STUDY

            The scope of the study is mainly focuses on the cost control with the view of keeping expenditure within acceptable limits. 

1.5       RESEARCH QUESTIONS

1.     How has cost been controlled in the company?

2.     How competent are the staffs responding to the control of various cost?

3.     Is the accounting department in charge of cost control?

4.     The minimization of fixed over head cost, is it a function of profit maximization?

5.     Can minimization of purchases be a function of profit maximization?

6.     Does labour cost control begins at the recruitment stage?

7.     How efficient and effective has the stock level been maintained?

1.6       RESEARCH HYPOTHESIS

1.      Ho: Other labour costs are not associated with gross wages.

      HI: Other labour costs are associated with gross wages.

2.      Ho: Shareholders do not have adequate information to judge the cost effectiveness of managers.

      HI: Shareholders have adequate information to judge           the cost effectiveness of managers.

3.      Ho: Effective cost control has no effect on profit maximization.

      HI: Effective cost control has effect on profits          maximization.

1.7       SIGNIFICANCE OF THE STUDY

            This research work is instituted to show the management of BAGCO those areas of the company’s programme that need cost reduction while still producing the company’s product efficiently and how it will enhance the level of profit.

1.     Cost control techniques will provide the management with economic ways of producing and marketing products.

2.     The organization will know how to accomplish a programme at a reduced cost.

3.     Managers at all level will know how to plan in terms of purchases, production, and marketing to embark on, in other to minimize cost.

4.     The shareholders will be furnish with better information which they can assess the management effectiveness on each of the company’s product.

1.8       DEFINITION OF TERMS

Agents: These are people who act for another person (Principal) in a business.

Budget: This refers to a statement that shows the inflow and outflow of money within a given period of time.

Business: This is an economic activity undertaken to produce goods and or services for the satisfaction of mankind at a reward.

Cost: This refers to expenditure incurred over a period of time to produce a product or a service.

Distributor: These are persons or agencies responsible for the commercial dispersals of goods.

Effectiveness: This simply means the ability to meeting a specified goal or objectives.

Efficiency: This means meeting up a specified goals or objectives at a reduced cost.

Management: This is all human activities aimed at planning, organizing, directing.