CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The main theme of this project is to bring to highlight the importance of costing to the existence of any organization, using the Nigeria Bottling company as a case study. Every activity and operation of an organization involves cost. In view of this, I intend to discuss the objectives, principles, techniques and methods of costing relating to the analysis and gathering of cost information for planning, control and decision making. It must be emphasized, that the existence of a sound well organized basic costing system is fundamental to whatever use is made of the information whether for routine cost ascertainment purposes or for a one – o decision.
Decisions depend on financial factors therefore it is of utmost importance that proper costing methods and techniques suitable for an organization operations to be ascertained, adopted and operated effectively and religiously throughout the organizations` process and operations. In essence, organization are established for a defined purpose which objective can only be seen or shown to the world by the output (product) it produces. For there to be an output the most necessary is the input. Inputs do not come for free; payments have to be made on them. Taking the Nigerian Bottling Company (NBC) as a case study, it needs inputs in the form of raw materials, labour etc. to produce goods (so drink) and payment must be made for these inputs, this boils down to cost.
1.2 STATEMENT OF THE PROBLEM
In the past, many companies have witnessed considerable lapses and increasing changes in management disciplines. Costing an important element in the overall operation of an organization through the provision of relevant information about cost is one of the problems organizations are facing. Because there are no satisfactory requirements to maintain detailed cost records, some small firms keep only traditional financial accounts and prepare cost information in an ad-hoc-fashion. In all but small firms this approach is likely to be unsatisfactory. There is a vast range of systems in operation ranging from simple analysis to computer based accounting systems incorporating standards, variance analysis and the automatic production of control and operating statements. These different costing methods are meant to suit different organization the adaptation of the wrong method, for a company will constitute a problem instead of a solution. Also poor or inadequate knowledge of a particular method of costing has constituted problems for many firms. Most companies are still using the simple analysis system to set cost while some companies do not even have a costing system. This no doubt has led to poor planning, control and decision making.
1.3 OBJECTIVES AND PURPOSE OF THE STUDY
This project is designed to provide a clear and concise understanding of the importance of costing to the manager in carrying out his/her responsibility for planning controlling and making decision which will lead to achieving certain goals. This research work aim to highlight that costing is i. Indispensable in determining the cost per unit of a product. ii. A factor in pricing decision, production planning and cost control. iii. An important tool in running a section, department or factory, that is, organizational planning, decision on alternative methods, wages cost control and material cost control. iv. Important in profit planning, make or buy decision etc.