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THE IMPLEMENTATION OF STANDARD COSTING AND VARIANCE ANALYSIS IN NIGERIA MANUFACTURING FIRMS (A CASE STUDY OF FIG BREWERY LIMITED, UMUNEDE)
The theme of this research work is the implementation of standards costing and variance analysis in Nigeria manufacturing firms ( A case study of Fig Brewery Limited Umunede). Question were developed for this study and the observed that data or information which was based on the research instrument. It was observed that more than seventy percentages of the manufacturing firm use standard costing and variance analysis in the area of budgeting, costing of inventory performance evaluation etc. Very view firms were observed to these techniques in pricing and cost control. It has been observed from the study that these have been an areas analysis over the years. There is still a marked death of qualified accounting personnel in Nigeria manufacturing firm. Questionnaire were distributed by the workers of various department of the company which includes production department, accounting department, sales marketing department, stores department, etc. From the questionnaire distribution, twenty-five (25) which prove adequate for the purpose of this study, which is investigating the areas in which manufacturing forms employ standard costing techniques and variance analysis. Finally the need for further research into this fixed is issued of (IDSCAVA) were stressed amongst other recommendation.
1.1 Background of the Study
Cost accounting in a specials branch of accounting that serve in both external and internal. In external reporting, cost accountants compute costs that are required for the financial statement and tax report in internal reporting, they collect data that can be used in the solution of a particular management problem.
Cost accounting provides cost information for easy management process that is providing cost information for decision making, performance evaluation control and analysis of problems that are facing or many face an organization into meet up with goals of cost accounting. Certain cost systems have overtimes been developed, one of which is standard cost system.
Standard costing can thus be designed to shown in relations, details how much each products cost to produce and sell at a given level of output and efficiency. Any difference standard cost and actual cost that the operation has been efficient or inefficient, this difference is known as variance and would assume a positive value if the operation has been effective. The process of computing the amount and isolating the cause of variances between actual cost and budgeted cost is known as variance analysis. Variance is an integral or component part of standard costing. Standard cost through variance analysis can also be used for inventory control, cost control and performance evaluation.
Fig project was conceived and designed in the 1970’s civic work started shortly after incorporation in 1980 and was commissioned on August 1985. At conception, Fig was to start “Fig lager beer” followed by “Shersy drink” and about three year later by non-alcoholic malt drink and finally a range soft drinks. Adequate provision for these was made in the plant design and procurement. The company commence production on the month of August 1985, with the introduction lager beer. Fig lager beer in the market, the company was producing at percentage capacity level before the attacked on product which was called “costing” otherwise known as excess foaming. This occupation has a devastating effect on the company on soda and management the other side this led to housing cleaning and the entire management was dropped.
The company now operates by the appointment of the executive directors from the existing due to financial problem. The company have about seven directors.
1.2 Statement of the Problems
The number of qualified cost accountants and management accountant in Nigeria attached to many capturing firm are not much. This is so because this qualified accountants to be spread other area of the economy like banks financial institution, government establishment, audit and management consistency firm to mention but few. There are very few account as compared in the number of the nation’s manufacturing firms. The study set to contribute to the empirical research in the discipline of accounting inNigeriaby working a standard cost and variance analysis to be put to use in the manufacturing companies ofNigeria.
1.3 Purpose of the Study
The purpose of this study helps us to find out the following:
- Whether standard costing and variance analysis are used in manufacturing firms.
- The types of standard costing used.
- The uses which standard costing and variance analysis are employee.
- To ascertain the department those are responsible for the investigation of variance.
1.4 Significance of the Study
The need for this study focused on the proper way of applying standard costing and the adverse variance that follows:
Nigeriamanufacturing firms often over look the use of standard cost which results to variance in manufacturing firms about standard costing in order to eradicate woes and inefficient use.
A better application of standard costing and variance analysis will lead to growth of firm inNigeria.
The applications of standard costing make it possible to establish which variance are due to external instance is where there is a price increase over which management have little control and which are caused by internal influences.
Finally, the study will provide available and to management in determining prices and formulating policies by establishing the most efficient and effective method of producing the unit which in itself lead to economics.
1.5 Research Question
In order to achieve the main objectives of his work the research will test the following hypothesis for the use of which standard costing is employed.
- Whether manufacturing firms use standard costing and variance analysis for budgeting.
- Does manufacturing firms use standard costing techniques for costing inventory?
- Does manufacturing firms understanding costing and variance analysis for performance evaluation.
- Does the implementation of standard costing and variance analysis lead to cost conscious and it is stimulate throughout the organization.
1.6 Scope of the Study
This work is carried out to cover manufacturing firms in Onocha area ofDeltaState. It is termed to Cover Fig Brewery Ltd, Umunede in particular.
1.7 Limitation of the Study
The problem encountered in the course of this work firstly, inadequate fund available to the researcher. Also the problem of lack of sufficient management text books, especially in the area of accounting in the researcher’s library. This necessitated the travelling to other institution for the literature review.
Secondarily, the reluctance of the company to release certain information and statistic, hence much information was supplied by words of mouth.
Lastly, some of the company workers refused to give the data as were needed on the ground that they must obtain a concrete permission from management before they can do that.
1.8 Definition of Terms
- Standard: It means to carry out on undertaking excellent, a noble or example for comparison.
- Implementation: It means to carry out an undertaking or to put something into effect.
- Cost accounting: This can be defined as the application of costing and cost accounting principles, method and techniques to the science, art and practice of cost control and the ascertainment of profitability.
- Variance: This is the deference between the standard cost and the actual cost of the product.