THE IMPORTANCE OF COST ACCOUNTING SYSTEM IN MANUFACTURING INDUSTRIES

CHAPTER ONE

1.0   INTRODUCTION

Cost accounting is considered as the managerial planning and control activities furnishing management with the necessary accounting tools to plan, control and evaluate the operation. The term cost accounting as however published by the institute of cost and management accountant is defined as “the application of costing and cost accounting principles, methods and techniques to the science art and practice of cost control and the ascertainment of profit”. It includes the presentation of information derived for the purpose of management decision making. The basic difference between a merchandized business and a manufacturer is that merchant purchases merchandise in a ready – to sell condition whereas the manufacturer produces the good it sells. In a merchandising business, the cost of goods available for sale is based upon the cost of the purchase in a manufacturing business, on the other hand, the cost of manufacturing the finished goods, as a result of this, there are the needs for every manufacturing business to be cost-conscious in the course of manufacturing goods. The cost accounting system depends upon the purpose for which the management requires the information for many purposes such as control, decision making and determination of price.

1.1   STATEMENT OF GENERAL PROBLEMS

The production of items is no problem but knowing the cost involved during such production is the issue at stake. One just has to recover the investment committed in the production of an item through accounting for such cost and passing it to either the middlemen or consumers Iclho pay for the items. This has created room for the existence of a production circle in most of our industries now. To account for the production of items materials, labor and overhead must have their own share of cost which resulted to be the complete production of the production. To this end, manufacturer find it little bit difficult to adequately account for the production cost they incurred and not being able to recover from the item produced, he refinancing power of the organization concerned is reduced in one way or the other, therefore, the producer has to be conscious of cost incurred in the cost at a certain period of time the financing  of the project plan becomes adversely affected or even not possible.

1.2   OBJECTIVE OF THE STUDY

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

Without excluding certain costs incurred during the production. The study is aimed at providing a 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 cost accounting system industry and providing solution weaker systems.

1.3   STATEMENT OF HYPOTHESIS

1. Alternative Hi – effective use of cost accounting as a means of control in manufacturing industries cannot minimize cost – Un11Ho – effective use of cost accounting as a means of control manufacturing industries cost minimize cost – UU! IHO effective use of cost accounting as a mean of control.

2.  Alternative – an efficient costing system helps an undertaking to ascertain it’s the cost of operation.

1.4   SIGNIFICANCE OF THE STUDY

The significance of the study can be reviewed in a different perspective. The study serve is important toward the writer’s program as a part of the Kaduna polytechnic requirement which enables the completion of the national diploma program.

1.5   LIMITATION OF STUDY

Limitation of the study are the constrains that restricts the writer from elaborating more on the project. In other words, they are restrictions encounter by the writer in the course of writing his project, which is beyond his control. The study was made based upon the presence of some restrictions. It will have been more them what it is but due to the constraints, this is what the writer was able to achieve. The major obstacle is the co-operation of respondent quite a number of responses were made but not to the extent of warranting a thorough knowledge of the organization’s activities as a result, the study unable to meet the writer’s objective. The writer was faced with financial constraints and as a result, could not go round getting more information for writing the project. This to some extent hampered the study.

Furthermore, the availability of time for the research work was also a constraint to the study. This is due to the fact that most writers’ time was spent in attending lectures writing semester tests and assignments.

1.6   AN OVERVIEW OF THE ORGANIZATION

Northern cable processing manufacturing company limited (NOCACO) was incorporated in June with the aim of supplying vehicle assembly plant with locally made cable and wires. The company’s equity share capital was distributed by 40% of the Nigeria shareholders and 60% to the foreign Partners from Germany. The above distribution was due to the technical nature of the activities to be carried out to satisfy the schedule III of the enterprise’s promotion decree. The firm started with the strength of 96 staff at the commencement of production, the firm now employs over 550 staff and having the recognition as one of the most important cables manufactures in northern Nigeria producing in accordance with national and international standards. NOCACO is correctly producing cable of about 400 different types. These cables including the house wiring cables. The insolated aluminum services cable, aluminum overhead line which is produced breed and steel re-enforce as well, the copper underground cables immured and un-armored as well as flexible cable fastening for the automobile industry and or the assemblers of air condition fridge and fretters. The firm principal factor of performance. Is the quality of its products. As a result, the company places a high premium on the quality of its products it designs and produces high quality of its products in accordance with national and international standards such as Nigeria’s industrial standard (NIS). International Electron – TECHNICAL COMMISSION (IEC). British standard and German Industrial standard to specific customer requirements The firm carries out rigorous quality control tests on its products at every stage of the production process rather – then at the first inspection, so as to maintain the high standard throughout the length of conductor of the cable. The high-quality maintenance in the organization can be proved the award worn by the company during one period or the other, the award is:

Nigeria industrial standard silver award, winner of PVC insolated (nonarmoured) electric cable for the power of lighting and also hold the ordinary award on the aluminum conductor.

Correctly, NOCACO has won the Nigeria best cable and wire production. The company is located in the heart of the Northern State of Nigeria Kaduna. The head office and the factory are located along Marchibi road, Kakuri Industrial estate Kaduna.

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