THE IMPACT OF STANDARD COSTING ON PROFITABILITY AND MANAGERIAL EFFECTIVENESS ON A MANUFACTURING INDUSTRY
Abstract
The influence of standard costing on a manufacturing industry’s profitability and managerial effectiveness. In order to obtain excellent profit-oriented objective performance and, on the other hand, to exercise suitable punishment for subpar performance, the standard cost reveals the goals, motivates activities, and provides checks or controls. Standard expenses are a starting point in the assessment of strengths and weaknesses because they influence how production facilities, management objectives, and management competencies are valued.With the establishment of the standard costing system in the 1920s, it was included into the accounting system so that total deviations could be gathered as well as specific variances, which in turn led to the preference of standard costing over alternative techniques.If any justification is needed for this project on the impacts of standard costing on profitability’s and managerial effectiveness of a manufacturing industries, it is thought that standard costing aids management in planning for the future.First and foremost, financial management needs to permeate every part of the company and influence all management’s daily routines. Second, while focusing on the results, cost should receive the most consideration.Last but not least, since revenue less cost equals a balancing profit, the profit should rise as that is what the industry wants.
CHAPITER 1
Introduction
The influence of standard costing on a manufacturing industry’s profitability and managerial effectiveness. Standard costing can be used to increase or decrease managerial and financial performance. It deals with people and calculating important information, in contrast to its scientific colleagues. The management task of planning and control includes standard costing, which is an old notion. Yardstick has, in fact, been very important for planning and control exercises. In actuality, before the idea of standard costing was developed, issues with production and making a profit were understood for many years.
James Dodson made one of the earliest attempts at costing. From this time on, there was a constant evolution of costing during the time of our early scientific management proponents like Fredrick W. Taylor, Henry Fayol, and others. He demonstrated how the accounts were kept by a shoemaker.
These standards help to clarify objectives, motivate management efforts, and give checks so that exceptional profit-oriented goal performance can be attained. On the other hand, they also allow for the application of appropriate sanctions in the event of poor performance. Standard costs lead to evaluations of production facilities, management objectives, and capabilities, and are the first step in evaluating strengths and weaknesses. These caused conventional costing to be preferred over other methods. Standard costing method was created in the 1920s and integrated into the accounting system so that both total and fine-grained deviations could be accumulated. These actions led to the formal declaration that significant expenses were standard or planning costs and their deviations rather than real and historical costs.
1.1 Summary Historical Backgrounds:
The business used in this study is Ferdinand Industries Nigeria Ltd. The Urualla location of this business is in Nigeria’s Imo State’s Ideato North Local Government Area. It was established as a limited liability corporation in 1975. The following components make up industry management:
(i) Executive Directors are first .
(ii) Manager of the general staff
(ii) Managers of factories, departments, and other staff members.
(iv) Additional staff members.
For this project, the company’s two primary operational industries include:
Industry of Ferdinand Aluminum Manufacturing
2. Manufacturing of Ferdinand Filters.
The approved and subscribed capital at the beginning of Ferdinand Industries Nigeria Limited’s operations was seven hundred and fifty thousand naira (N750,000.00). Loans from financial institutions and assets acquired on a lease with escalating payments are not included in this initial capital base. Ferdinand Group of Companies Plc are the holding company for these industries, whereas Ferdinand Group of Companies Plc are its subsidiaries.
Industry of Ferdinand Aluminum Manufacturing
The Ferdinand aluminum manufacturing business began full operation in 1975 with a team of 200 workers, including both male and female employees. A manager oversees this sector and receives instructions from the executive director.
A variety of premium aluminum kitchen and household utensils are made by the Ferdinand aluminum manufacturing sector, including the following:
(i) Luxurious castrates in heavy gauge
(ii) Pans for frying.
(iii) Water heaters
(iv) Plates made of luxurious aluminum
(v) High-quality aluminum cups
(vi) Elegant aluminum bowels with a cover
The aforementioned items are created in sets and go by the brand name “Touch.” The products’ logos also use “Touch” as their trade mark.
Ferdinand Aluminium Manufacturing Company employees receive training from Cyprus’ A.I. Kalogeros (export) Limited under their experience.
This industry obtains the raw materials needed for production locally. It can be purchased from Port Harcourt’s Aikan Aluminium or First Aluminium Plc.
Industry that manufactures Ferdinand filters
In 1982, the Ferdinand Filter Manufacturing Industry began operations with a workforce of 200 male and female employees. A general manager oversees the sector and follows the executive director’s instructions.
High-quality and highly effective Ferdinand Soparies automotive filters are made by the Ferdinard Filter Manufacturing Industry and are used by numerous industrial and automotive facilities. The workforce of the Ferdinand filter manufacturing sector is trained using the knowledge acquired from the French business Soparies business Limited. Among the various kinds of filters created are:
(a) Opinion Filter
(b) Filtering using elements
(c) Special filter and
(d) A cleanser of the air
The items listed above are made in a variety of sizes and branches, and the thorough analysis of the many types of filters made is provided below.
(a) Opinion filters are
BRANDS
USERS
(i) CV 325
Volvo autos
(ii) CV 379
Peugeot Vehicles
(iii) CV 394
Cars made by Voxwagen, such the Santana Passat
This type of filter is known as an opinion filter since it is made to be fixed in a car by spinning or screening inside to become balanced. It is used to stop engine oil from entering the engine. Spinion’s cuter cover is composed of heavy gauge metal.
(b) The element filters
BRANDS
USERS
Cap 330
trucks made by Mercedes-Benz
Sop 8
Flat trucks
Sop 117
new generation Mercedes-Benz vehicles
Cap 326
Mercedes-Benz buses and trucks
This kind of filter is cylindrical in shape and has either a thin gauge perforated metal cover or a thick gauge perforated paper cover. Thick gauge paper or metal without perforations is used to seal the two heads.
(c) Filters for air purifiers
BRANDS
USERS
FPA
Land Rover Ranger
FPA 300
Opel autos
The design of an air cleaner is similar to that of an element filter.
(d) Special filter: This filter was created specifically for industrial plants. Delta Steel, NNPC, NAFCON, etc. Ferdinand Soparis automotive filters are made using both domestically and imported raw materials. The filter is constructed of numerous parts, including:
1. Filter paper comes in a variety of varieties, including oil paper, fuel paper, and air paper.
2. Metal: For the splines’ outer cover, metal in various gauges or thicknesses, such as 0.25, 4, 5, and 6 mm, is employed.
3. Gaskets: There are various kinds of gaskets, including rubber and paper gaskets.
4. Special Gums: “plastisol” is the name of the gum that is used for the end covers of the filer. Additionally, colored plastisol is utilized for specific filters.
5. Springs and gauges come in various diameters.
6. Paints: To distinguish Ferdinand products from other products, a paint known as Ferdinand blue is utilized to color such products as the spinions.
7. Printing supplies like white ink
8. Packets: Used to package produce or filer.
9. For cardboard papers, use the paper cover’s exterior shape as a filter.
1.2 THE PROBLEM IS STATED IN PARAGRAPH
The economy in Nigeria right now is in terrible shape. Numerous steps have been taken and are being done in this regard to improve the future economic position. The following are some of the initiatives made to revive the economy:
Program for structural adjustment (SAP)
foreign exchange market of second tier.
The currency exchange market.
(d) Invest in importation
(e) Importation restrictions, etc.
This policy has had and continues to have a negative impact on consumer purchasing behavior. The manufacturing sector of the economy has seen a surge in production costs, which has translated into high prices for manufactured goods. As a result, most production was unable to register any meaningful level of demand since consumers’ ability to pay was no longer able to keep up with the rate of price increases. Civil workers, public employees, and other wage earners who no longer have enough money in their take-home pay pockets to buy them consume the majority of the manufactured goods. In this sense, customers spend the majority of their limited purchasing power on food in order to put survival before luxury. Greater efforts should be taken to maintain expenses as low as possible for economic reasons, through efficient and effective use of both people and material resources. The issues are not resolved by the foregoing; more issues continue to arise in such other areas as:
(i) Unreliable power supply: The Nigerian Electrical Power Authority (NEPA) does not provide firms with sufficient services. NEPA will shut down the electricity and the production process will abruptly stop, causing significant damages for which additional costs are added to cover the entire production.
(ii) Inadequate water supply: Water is always in low supply, and the water board frequently fails to provide it when a manufacturer actually needs it. In order to see that industrial activities are taking place, the manufacturer turns to open markets to purchase the water they require for their business. In this regard, purchasing water on the open market is more expensive than purchasing it through the water board, and regardless of whether water is supplied or not, the water board will typically compel you to pay a fair monthly water fee.
(iii) Poor Roads: In Nigeria, particularly Imo State and Ideato North, poor roads lead to high transport costs when it comes to moving raw materials from the point of extraction and finished goods from the point of manufacture to the market where they are needed.
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