Cost Accounting Information And Price Determination Pdf
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- Cost Accounting Information And Price Determination (A Case Study Of Nigerian Breweries Plc, Enugu)
- Cost Accounting Information And Price Determination (A Focus On Life Breweries Limited)
- COST ACCOUNTING INFORMATION AND PRICE DETERMINATION (A CASE STUDY OF NIGERIAN BREWERIES PLC, ENUGU)
Cost Accounting Information And Price Determination (A Case Study Of Nigerian Breweries Plc, Enugu)
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According to Austin Kleon "All creative work builds on what came before". Chapter One 1. Chapter Two 2. Chapter Three 3. Chapter Four 4. Chapter Five 5. Posted by UniProjects. Net under Project Topics and Materials. The task of the accountant is to transform raw data information. Cost and management accounting are the parts of accounting discipline which have developed, to meet up with the progress in technological advancement, production, sales and finance.
These aspects of accounting have broadened the boundaries of accounting profession and made it more useful to modern business enterprise. Cost accounting is probably the field of accounting which has developed most greatly within the last half of this conturing and there is no doubt about its growing importance.
This is partly because of the growing complexity of modern production methods, which results in greater capital investment and higher proportion indirect costs, and partly a reflection for the growing competition and widening markets in the business world.
All these factors necessitate the keeping of systematic and accurate records which will show the cost of goods produced an contracts fulfilled. The job of accounting has shifted emphasis and focus from recording, interpreting and analyzing historical financial transactions, to a more challenging task of setting controls, devising the most efficient method of collecting, interpretation, analyzing and transformation of costs into useful information which is made use of by management in decision making which effects the future.
The cost accountant will draw on information, provided by the financial accounting system but he will also need to obtain much more detail of the internal workings of the business.
He will use data in monetary and non-monetary forms of house worked capacity of materials used, product manufactured, machine running hours, idel time ect. He is concerned with finding the actual cost of products operations and departments, often comparing this with an estimated or ideal cost. The emphasis on decision making in recent years has brought together different disciplines which once were viewed as separate areas of knowledge.
The accountant has to be knowledgeable over a broad area if, he is to be efficient in providing information, which is relevant and useful for decision making. The great task of an accountant is to transform raw data into information. Many difficult decisions arise as to whether to buy new equipments which will make new products or save cost and whether to make or buy components, whether to accept work at cut threat prices etc.
The cost accountant discusses with the engineer about the life span of the plant and machinery, the most economic and efficient way of its use, the most appropriate method of depreciation, whether it will be more profitable to dispose it at a salvage value or to continue its use until it is scrapped.
The supervisor provides the cost accountant with the information needed as to the usage of fuel, gas, energy. Light and heat etc. The cost accountant will also look into the administration of wages; determine whether it is economical to engage labour at a piece rate or at a time rate, employ more workers and make room for shift futy or pay overtimes, the profitability or otherwise of the firm being machine or labor intensive cost accounting ensures the maintenance of good salaries and wages record, of classes of workers.
Cost accounting has aided management in the formation of a sound and enviable labour policy and the determine the rate of turnover of labour. Accounting information has assisted managers to control cost of raw materials effectively, determine the re-order level of stocks of raw materials. That is, after taking into account the mimum stocks develop and the safety stock and also considering the carrying ware-houseing and ordering costs, rate of efficiency etc.
The cost accountant laises with the works manager and from him, knows the processes involved in the production or manufacture, the cost incurred at every stage and seeks ways of controlling costs or improving the method of work which leads to reduction in cost and ultimately to increased efficiency. The cost and management accountant therefore should have an in-depth knowledge of cost in every sphare of the organization in which he works.
He is usually a member of any budget committee set up in the organization and in some cases the chairman. Hence it is his knowledge about the operational standards and the information which he obtained from the analysis of collated costs that form the basic budgeting tool. In fact, with the development of cost and management accounting, the job of an accountant has increased from that of a financial historian to that of a financial analyst who provides management with needed information for future decision, for comparison and efficient management.
Without an effective system of cost accounting, it is doubtful whether a business of any size can survive in the intensively competitive condition of today. No matter how intelligently the product distribution and communication mixes are conceived, improper pricing of a product may nullify the effect of all other actions.
But, in spite of the importance if pricing decisions, the skills and analysis which are often used in practice do not approach the professional orientation used in the management of advertising, sales promotion or personal selling. There are other factors which influence the price of products of firms which vary with circumstances, types of the commodity services rendered.
Before delving into some of these other factor that influence product prices, let us first and foremost, direct our attention to the most important factor at play in the cost and price of beer, including components of the cost structure. Since these are actual figures of cost and revenue obtained in the previous periods, the management can determine the price of its products through the information obtained from this past financial statement.
This method is more reliable when there is steadiness in economic activities. Management most often base it price policy on budgeted cost or estimated prices through observed trends in economic activities. This is mostly applicable in newly establishment firms whose products are making their first outing to the market.
Equally, the reverse is the case with arise in the price of essential commodities Food stuffs. The factory with larger size or capacity will produce and sell at a lesser price than a small sized one.
For examples Nigerian Breweries plc has a capacity of about hectolitres or million cartons per year while its sister industry, the life Breweries plc has a capacity of about hectolites or 5.
Under normal circumstances and other varioables held constant, Nigerian Breweries beer should be changer. The reasons are:- a. Large sized capacity enjoyz quantity discounts, especially in the purchase of materials. Some fixed overheads like depreciations, some types of labour, rants rate etc, are shared by the large quantity of production and this makes the fixed cost to be lower per unit of product.
Also the sales expenses per carton of beer will be lower with capacity production. Other costs like maintenance cost, top management salaries, entertainment and promotion expense are cheaper per unit of production with increase in capacity. SALARIES AND WAGES This is sub-divided into direct and indirect: direct wages are these that are directly attributable to production whereas, indirect wages are those not associated with the actual manufactures but in all, they constitute the cost upon which the value of product is measured and other things like.
Quarantining ii. Hearty overtime or payment for unnecessary overtime iii. Number of the expatriate officers in the brewery. The salaries paid to these expatriates are usually very high and in some cause are paid in hard currency. All these tend to increase cost abnormally. These raw materials especially soghum and maize constitutes the major cost of bee. Helps and caramel being imported, maize as a raw material forms a significant cost of beer. For example, when the price of maize was 14, Efficiency can result from proper control of the enterprises activities, adequate work supervision, reduced wastes and abnormal loss, decreased idle time, employing the minimum labour requirement that is qualitative as against quantitative labour force.
With increase in efficiency, the cost of production decrease and consequently, the profit will be affected. For instance, before the advent of second-tier foreign exchange market S. M , the value of naira was strong in the foreign market. Then the value of one dollar was approximately 80k but, the rate of foreign exchange has taken a dramatic tum since the introduction of S. At the initial time, the official SFEM rate was M ; The prevailing rate is As a result of this, the prices of both imported and local raw materials and spare parts which constitute above 90 percent of the cost of beer escalated similarly.
The enumeration above are those factors that can inflence the cost and price of bbe in this country within the enterprise. We shall briefly look at other variables that may be take into account before a firm formulates its pricing policy.
In this cases, the firm is faced with a responsibility to the public. In such cases, the price which produces satisfactory profits may be unacceptable to the market. It is unacceptable in the sense that only a small number can take advantage of the product or that the price would bring a deluge of public criticison.
Under such circumstances, a price much lower than the necessary price to maximize profit or make satisfactory return is used. The mult-product firm is in a much better position to follow such practices than a single product form as it can cover small losses on some products in the remainder of the lone.
Minimization of loss: pricing is another case of pricing below cost, in high fixed cost industries, idle plants are excessivel costly. If by reducing prices, the plant can be utilized, any contribution to fixed cost reduces losses. The firm may set prices which are below total costs but not below average variable cost. The price decision maker should recognize the fact that the number of prospective as well as the existing firms in the industry has a fundamental impact on the degree to which a firm has discretion.
Revenue is the product of the unit selling price and the quantity produced, therefore, cost and price are the basic factors in determining whether an organization make a profit or loss. It has been observed that the failure of many products in the market is due mainly to inadequacies on the part of management, to apply cost information in arriving the market price of such products.
Among other things, the project intend to: i. X-ray necessary conditions for costing system iii. Evaluate the appropriate basis of preparing the cost of products. Dissect and analyse the elements of cost involved in the brewing of beer and the extent to which the cost or price of beer is being influenced by the actual cost of production.
Know other factors at play in the determination of the price of beer through the idea of the actual cost figures involved. See the practical application of the principles enumciated by cost accounting and to determine any shortfall in its application and if fully applied the advantage thereto.
Research into the existence or usefulness of cost information, by appraising the existing principles both as they exist in theory and as they are practically applied, to formulate some other efficient wages of determining price through costing information, especially as it concerns a beer industry. Determine an appropriate condition and environment for proper collation and analysis of costs.
How is the cost information generated by the accounting system applied in arriving at the selling price of a product. To what extent does the management of an organization make use of cost accounting information in determine the price of its products. HO: Pricing decision is a function of costing information HI: Pricing decision is not a function of costing information 2.
HO: The price of a product is determined by market price HI: The price of a product is not determined by market forces.
Cost Accounting Information And Price Determination (A Focus On Life Breweries Limited)
Preview chapter one below. The need for cost accounting came with increased industrialization, engineering an expansion in manufacturing. It is therefore obvious that in efficient system of costing is essential for industrial control. And here, we are trying to apply cost information which is efficiently determined to pricing policy decision. There is not yet an agreed best method of costing products though it may be helpful to recognize that cost allocation are being used to obtain a mutually acceptable price and not necessary to portray caused and effect relationship of cost incurrence. But price determination from cost under efficient operation through efficient cost system will most probably approximate the price of the product to its value.
The need for cost accounting came with increased industrialization, engineering an expansion in manufacturing. It is therefore obvious that in efficient system of costing is essential for industrial control. In period of boom, manufacturers are able to show profit notwithstanding the leakage which pass unchecked, but in periods of trade competition concealed inefficiencies have to track down and rigorous control must be exercised to ensure even modest margin profit. There is not yet an agreed best method of costing products though it may be helpful to recognize that cost allocation are being used to obtain a mutually acceptable price and not necessary to portray caused and effect relationship of cost incurrence. But price determination from cost under efficient operation through efficient cost system will most probably approximate the price of the product to its value. In this regard, accountings is often explained as sciences of activities that are connected and form successive steps starting with observing, the collecting, recording, analyzing and finally communicating accounting information to its users. The study of modern cost accounting yields insight regarding both accountants role and managers role in an organization because managers want to know how accountants measure performance and often depending upon accounting data for guiding their decisions.
The topic, “Cost Accounting Information and Price Determination” Is teaching about cost accounting when adequately treated and its uses to the management of.
COST ACCOUNTING INFORMATION AND PRICE DETERMINATION (A CASE STUDY OF NIGERIAN BREWERIES PLC, ENUGU)
Increased advancement in industrialization, engineering and general commerce has thrown a great challenge to managers. There is increased competitions, and the survival of any company lies on the ability of the managers to apply the scare resources efficiently. Efficient management of resources call for proper control of inventory and revenue therefore, effective system of costing and good pricing policy are central and pre-requisite for the survival and growth of any organization in the global economic village.
In this regard, accountings is often explained as sciences of activities that are connected and form successive steps starting with observing, the collecting, recording, analyzing and finally communicating accounting information to its users. Cost accounting has a major purpose of accumulating the cost of an organizations products and services. This aspect is regarded as product costing purpose. A view shared by previous researcher on this topic that there has been a shortfall in the utilization of cost accounting information in some organization and their pricing policy decision making. It is right of this that this work attempt to suggest a good system which comprises a set of procedure, records and facilities that have to do with the systematic and routine compilation and dissemination of cost information and price determination.
This research study was conducted to determine the impact of cost accounting information on price determination in some manufacturing companies in Nigeria. The objectives of the study were to determine the components of manufacturing cost information and also to identify the lapses therein. Data collected were analysed using frequency table and chi-square. The result of data analysed showed that cost accounting information contribute a lot on price determination of products.
In this regard, accountings is often explained as the sciences of activities that are connected and form successive steps starting with observing, the collecting, recording, analyzing and finally communicating accounting information to its users. Cost accounting has a major purpose of accumulating the cost of an organization's products and services. This aspect is regarded as product costing purposes. A view shared by the previous researcher on this topic that there has been a shortfall in the utilization of cost accounting information in some organization and their pricing policy decision making. It is right of this that this work attempt to suggest a a good system which comprises a set of procedure, records, and facilities that have to do with the systematic and routine compilation and dissemination of cost information and price determination.
Apart from the personal observation, this assertion has also been proved by the responses from the questionnaires and the test of hypothesis costs may be disregarded while making pricing decision if profit, is not considered upper most objective of the company.