THE EFFECTIVENES OF STANDARD COSTING AS A CONTROL TOOL FOR PERFORMANCE EVALUATION IN MANUFACTURING INDUSTRIES
(A CASE STUDY OF ANNAMCO EMENE ENUGU)
The direction towards on efficient production of good and services curled be as a result of an effective control of cost of production. The study of standard cresting as an aid is production cost control is very imperative especrahy in an economy with high rate of inflation and where prices of grads and service are constrarthy increase with no hope of reduction with the effect that th real value of mey in the consumer hand is lower than its face value.
This being the case the consumers only have little to spend there fore what ill be uppermost in their minds is to buy product: of cheaper rate when compared wish other products of the same quality.
So this research hoke into ho effective standard costing is in the control of production cost and performance appraisal with reference to the Anambra motor manufacturing company (ANAMMCO) Enugu.
It is the believe of the researcher that for the company to meet one of its goals of producing at reduced cost but consistent quality for customers satrafaction. It have to establish measure to effectively monitor and control production cost standard costing is one of the measures of achieving this.
In order to achieve this p upose backround of the stuy statement of peoblem objective of the study signitance study was shown in chapter one
LITERATURE REVWIE
30. Basic variance analysis.
Reference
RESEARCH DESGIN AND METHODOLOGY
Data presentation and analysis
CHAPTER FIVE
FINDING CONCLUSION AND RECOMMENDATION
Boliographi Reference
Appendix
The direction towards an efficient production of goods and services could be as a result of an effective control of cost of production. The study of standard costing as an in production cost control is very imperative especially in Nigeria an economy with high rate of inflation so this research will brok into how effective standard costing is in the control of production cost and performance apprcrisal with reference to the Anambra motor manufacturing company (ANAMMCO) Enugu. This research will cover the control of production cost which include chrect material cost, chrect labour cost and fachy overlead cost through the use of standard costing system and also the analysis of variances which might arise as a result of comparing the actual cost incurred with the existing standard cost of the company. Ion order to source out data for this study the researcher intend to use primary and secondary data which is the most common source of data. The primary data will be soured through the use of questionnaires. Face to face interview and close observation as the case may be while the secondary data will be sources through text books journal and lecture note. The limited time given for the completion of this research will be amplify when considered that the researcher have to attend to other aspect of his study other than the research work alone since both research work and academic shidres will be run concurrently.
I must also curmment in the content transportation to Emene where the company of my case study is located the inaraidiliyt of the fund required for this press’s the seand cirstrant. This will be followed by the inability of the management to chrulge certain information which they will consider sensitive and the publication of which will be detrimental to their operation. More so, the attention of the member of top management whom may not be chanced will pours the third constant. It is the believer of the notice of the Nigeria would be entrepreneurs and already existing comparing the need to appreciate the use of standard costing in controlling cost and bars for performance evaluation..
CHAPTER ONE
INTRODUCTION
Civilization sincerely is a welcome phenomenon. The business world is not left out in its resultant effect. Thus, the degree of complexity and sophistication of situations obtainable in the present days business has called for not just experience but effective and formidable managers. The practicality commitment and inefficiency of every manager could be measured based on his ability to plan organize, direct, cirutrol, co-ordinate meteorite and evaluate his business activities these function centers on the resultant checksum makings the process of which are route which have no close substitute as far as the profit making and progress of any business is concerned.
Hence it is early detached that the profit making to cover the cost and the survival o every industry has informatively become an increasingly difficult task therefore mangers are faced with entire managerial decision making crises. Sequel to that the ability of every management to have the managerial decision making process . under control become pertinent as such industry strive to push and present its product is a position it could be preferred to the products of other firms in the same line of business. This gare rise to management accounting which improved from the old quantitative approach to accounting to encompass the quantitative approach to accounting practices (Nweze 1999: 158) management and cost accounting is one of the largest part of the entire business management is essentially an embodiment of product costing planning and decision making activities toward the enhancement of the product quality and evaluation of the performance of the various employees geared toward the attainment of the overall objective of the organization or industry, it is all accounting in the broadest sense (Size 1979:15) This product costing which encompass standard costing aims at the ascertainment of the cost of that product
Nevertheless the efficiency of every manager hers in his ability to manipulate and harness successfully all the factors needed for effective production. This creates the need for development of certain measured for the control of activities of subordinate with respect to cost volume of output and profit. However cost is the most crncral because its may sometime assume a limiting factor. Mores, it affects profit and its central lead to profit realization (Brown 1975: 172). According to Keller (1996:172) every firm which aspires for efficient productive additive and long term profitability should plan and control its cost of production. In line with this firm should aim quality specification and other representation made to the customers.
Precisely the cost incurred by manufacturing firm in their cruise of production most importantly need to be controlled owing to the sense that they forms the bases for which product cost is analyzed. These cost include the direct material cost direct labour and factory overhead or indirect manufacturing costs.
Many organization prepare their budget annually usually at the beginning of a fiscal year. This budget is expected to cover all the organizations phases of business activities and more so acts as a guide for measuring their overall performance. This budget is a total concept and might not make any meaning to the component departments of the organization. It is then broken to a unit concept which is what standard cost is associated with for the purpose of control and performance appraisal. Standard costs are part of as overall operating budget of an organization that has been elaborately and carefully defined; in that they are developed in such minute details that any derivation from such standard can be traced to its source and responsibility for such derivation established.
At this point it become necessary to point out that for standard costing to operate efficiently as a control, cost centers must be established with clearly defined areas of responsibility so as to cover only those matters which clearly comes within the control of its supervisor. It may be a location equipment or items so that deviation can be traced directly to the cost centers from where it occurred without muddling up the control structure of the firm or industry. This study centers on the use of standard costing in the production cost control and performance evaluation in manufacturing industries, but because of time and cost involved in covering the number manufactures. The researcher. Focus his attention to the Anambra state more manufacturing industry (ANAMMCO)_ Emene Enugu.
Knowing that a standard is an establish basis or measure against which actual result of performance is bench marked. Standard cost is a predetermined or established cost, or target or goal which the management of a firm or industry aims at achieving given a conducive operating condition with a view of attaining maximum efficiency in its production. I is a pre- determined or forecast estimates of cost to manufacture a single unit or a number of cost to manufacture a single unit or a number of units of product during a specific immediate future period (Keller et al 1966: 171) There fore, standard costing is a costing technique which compares the standard cost of a units of product with the actual cost to determine the efficiency of operations with the ultimate intention of carrying out any remedial action whenever necessary.
Based on the fact that they are pre- determined units cost estimates deviation are bound to occur and these are pin pointed in that they represents measures of performance. These deviations are termed variance, and are isolated for an in-depth analysis to reflect in the variance aids to the initiation of corrective and control action, so as to direct the operational activities of the firm to conform with the standard cost as determined prior to those activities.
One basic principle is that standard cost (whatever type) is used as a control of production cost, employees excesses and thus ards to the performance apprcrisal bearing in mind the over all objective of the firm or industry. As opined by Ama (2001: 7) the task of control accounting is to produce data at regular interval in a standard form so that the firms actual performance can be compared with plans and budgets and differences analyzed by causes. By implication the progress of every manufacturing firm cannot be achieved on a total neglect of this cost control technique.
The Anambra motor manufacturing company Ltd (ANAMMCO) a manufacturer of automobile engines is not an exception to these assertion. For cost reduction and minimization it is necessary that firms adopt standard costing and make effective use of it as a cost control measure with which to evaluate its performance
The Anambra motor manufacturing company limited the case study of the researcher was established by the federal military government of Nigeria in its effort to move the country forward the attainment of industrial development and technological advancement and independence. This in 1975 started with as inter aha negotiation of joint venture agreement with among other manufacturing of vehicle DAMLER BENZ AG OF THE FEDERAL REPUBLIC OF GRRMARY. This partnership agreement between the federal military government of Nigeria and Daimler Benz AG was signed on the 12th December 1975. On duly 8, 1980, the first executive president of Nigeria Alhaji shelar Shagari commissioned the plast located at Emene Enugu state which occupies a spiraling 3000, 000 square metre. Official production commenced on January 1981 with a staff strength of 794 staff comprising 782 Nigeria and 12 foreign expatriates. The plant has an installed production capacity of 75,00 commercial vehicles per annum.
The company originally has the plan to produce truck for the Nigeria market but have today chirersifred to a product range which include for rapid industrialization of Nigeria. Track such as L700, l1418 and ACTROS were not only produced but they have gone step further in the designing fabricating, manufacturing and production as well as sales of buses and other utility vehicles. Among its product range include; MBO 800, MBO1418, MBO 1721, MBO 4000 MARCOPOLO/ BUSSEAR, FIR FIGHTING VEHICLE Ambulatory mobile clinics refruse collector and other various specialized types of vehicles.
Despite the fact that prices o these product are dictated by in falconry trend in the economy. This does not value not the cost factor in producing the vehicles so as to maintain a lower production cost which invariably helps the company to under and its rivals.,
1.2 STATEMENT OF PROBLEM
The problem of control as a function of the business manager and evaluation of the performance of the entire organization has become a hydra – leaded outlook. Moreso, the economic hardship characterized b y high rate of inflation, fluctuation in the prices of goods, high cost of production among other task has led many companies to find ways of their production facilities in operation till a time when the economy is expected to improve. Such companies adopt cost control over production cost as to reduce and elim
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