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The Effect of Costing Methods on Price Determination in a Manufacturing CompanyProject / Seminar Material Reference ID: PS-42-TM |
This research work titled "The Effect of Costing Methods on Price Determination in a Manufacturing Company (A Case Study of Unilever Nigeria Plc)" is dedicated to God for his enabling grace and to all computer enthusiasts who help to make life a pleasant experience.
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I owe my indebtedness to my Supervisor (Name of your Supervisor), the Head of Department (Name of your HOD), the Lecturers in the department of Accountancy / Accounting, Book Authors and Profound Scholars of existing/related research material for your moral support that facilitated the successful completion of my (Tertiary Institution level). I am grateful to God Almighty and my parent for their financial support in my career. I really appreciate you all for everything, Thank you very much.
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PRELIMINARY PAGES
REFERENCES
APPENDIX(CES)
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The study was carried out to investigate The Effect of Costing Methods on Price Determination in a Manufacturing Company using Unilever Nigeria, Plc as a case study. Manufacturing costing methods are accounting techniques that are used to help understand the value of inputs and outputs in a production process. By tracking and categorizing this information according to a rigorous accounting system, corporate management can determine with a high degree of accuracy the cost per unit of production and other key performance indicators.
Management needs this information in order to make informed decisions about production levels, future investment, competitive strategy and most especially price determination. Such information is primarily necessary for internal use or managerial accounting.
Chapter one deals with its introduction, background, objectives, significance, scope and limitations of the study, it also deals with statement of problems and hypothesis and the relevant research questions.
Chapter two deals with the literature review where the various types of costing methods and its effects on pricing are discussed.
Chapter three deals with the research design and methodology in which the population and sample sizes were determined.
Chapter four deals with the presentation and analysis of data, two hypothesis were tested and results interpreted. It was concluded that the use of costing methods will help to determine the profitability of a manufacturing firm and that costing technique will enhance a manager’s understanding on product cost.
Chapter five deals with summary, conclusion and recommendations.
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A costing method is a method of costing which is designed to suit the goods that are processed or manufactured or the way that services are provided. It follows therefore that each firm will have a costing method which has unique features.
Nevertheless, there will be recognizable common features of the costing system of the firm who are broadly in the same line of business.
Conversely, firms employing substantially different manufacturing methods, for example, a food processing and jobbing engineering factory will have distinctly different costing methods as will the huge variety of services organization. It must be clearly understood that whatever costing method is employed, the basic costing principles relating to analysis, allocating and apportionment will be used.
Categories Of Costing Methods
There are two broad categories of product costing methods; namely:
Specific Order Costing
This can be defined as the basic costing method applicable where the work consists of separate contracts, jobs or batches.
In most cases, the job or contract is the cost unit and frequently but not always, the jobs or contracts are different from each other. The main sub-divisions of specific order costing are:
Continuous Operation / Process Costing
This can be defined as the basic costing method applicable where goods or services result from a sequence of condition or repetitive operations or processes. Costs are averaged over the unit produced during the period. It can also be called unit costing.
The key feature of this definition is that operation costing seeks to establish the unit cost per unit during a period for a number of identical cost units.
The main sub-divisions of operation costing are:
This type of costing although not relating to production cost unit uses similar principle whereby an average cost is established per unit of service. For example, an average cost per meal supplied could be calculated for the content which is a service cost center.
Price Determination
Price is a value expressed in monetary terms. Value is defined as a quantity expression of the power a product has to attract other products in exchange.
Price may also be defined as the amount of money which is needed to acquire in exchange for some combined assortments of product services.
Marginalist pricing is a process by which prices are set to achieve a particular maximum value for some objectives. It compares the marginal cost of extra output with the marginal extra benefits from the output.
The objective to maximize profit reaches its maximum value when marginal cost (continue arising) equal the marginal benefit of the unit produced.
Marginalist pricing is used in theoretical explanations of price and output decisions. For example, a firm with a profit maximizing objective will produced at a level of output and sell at a price where MC= MR, a firm with a revenue maximizing objectives regardless of cost will produce a level of output and sell at a price where MR=0.
Full Cost Pricing
The traditional account methods of attempting a price product is full cost plus pricing formula. By this method, sales prices are established by:
This may be a full production cost or it may include absorbed administration, sales and distribution overhead as well.
This mark up is traditionally considered to be rigidly applied to all production with no flexibility in the size of the margin added to any individual product.
The History Of Unilever Nigeria Plc
Unilever Nigeria Plc was incorporated as Lever Brothers (West Africa) Ltd on 11th April 1923 by Lord Leverhulme, but the company’s antecedents have to be traced back to his existing trading interests in Nigeria and West Africa generally and to the fact that he had since the 19th century been greatly involved with the soap business in Britain.
Unilever Nigeria Plc started as a soap manufacturing organizations in Nigeria. After series of mergers and acquisitions the company diversified into manufacturing and marketing of foods, non-soapy detergents and personal care products. These mergers and acquisitions brought in lipton Nigeria Ltd in 1985, cheese brough ponds industries Ltd in 1988. The company changed its name to Unilever Nigeria Plc in 2001.
Unilever Nigeria Plc is a public liability company quoted on the Nigeria stock exchange since 1973 with Nigeria currently having 49% of equity holdings. It is an organization that is equipped with many and different communication gadgets to and in its operation. The communication system include computers with internet connectivity and wide area network, telephones and tele printers, fax machine and other communication apparatus to make the passage of information from one department to another and from one branch to another easy and fast.
The company has a powerful organizational structures and organizational chart which makes the flow of authority and accountability possible. Its contact address is at 1 billingsway Oregun Ikeja Nigeria.
The following facts are the statement of research problems:
The aim of the study is to investigate the Effect of Costing Methods on Price Determination in a Manufacturing Company. In achieving this aim, the following specific objectives were laid out as follows:
This is a section where the researcher highlighted several questions which are deemed necessary to be answered. Among the questions to be answered in this research work are:
In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.
Hypothesis One
Hypothesis Two
This aspect of the work deals on the possible benefits derivable by any known and interested readers of this work.
Although, the significance of costing methods on price determination cannot be repeatedly over-emphasized, but for the purpose of information this research work tends to convey and consequently for the purpose of simplification, some of the important significance of costing methods in price determination includes:
This research work examined the importance of costing method in a manufacturing firm. This costing method can be analyzed in greater depth, that is it can be grouped into process costing, where in most firms, manufacturing is on a continuous basis, as a result of which a process may frequently be uncompleted at the end of an accounting period.
One way to solve this is by calculating what is known as the equivalent or effective production, to which is apportioned, the cost incurred. This will be discussed in details in this project. It is grouped into job and batch costing which is under specific order costing.
This research work was not achieved on a platter of gold that is easily and effectively smooth, without the researcher encountering some problems and obstacles on his way.
Below are some of the problems encountered by the researcher in the course of the study:
Batch costing:
This method is employed in many light engineering works where a number of identical items are produced in one batch.
Joint product:
There is two or more product resulting simultaneously from an operation. They are produced together and joint cost is incurred.
Scrap:
It is discarded material, having some recovery value which is usually either disposed off without special treatment.
By-product:
It is the term used when the product has a small sales value compared with the main product.
Spoilage:
This occurs when produced units are substandard and must be either discarded or sold off scrap or cheaply.
Cost center:
A cost center could be a location of a person or an item of equipment connected with an undertaking in which costs may be ascertained and used for the purpose of cost control.
Job costing:
A job is a mini-contract, to produce a given product at the specification of the customer. A job involves the product of goods but not the rendering of services.
Process costing:
This method is suitable where products are manufactured by a set of processes, which are not isolated to individual jobs as in job costing.
Service costing:
It is applied to operation costing service as opposed to products and may be used for a service undertaking or for a service cost center within an understanding.
This chapter focuses on the review of related literature. A literature review includes the current knowledge as well as theoretical and methodological contributions to a particular topic. It documents the state of the art with respect to the topic you are writing. It surveys the literature in the topic selected. In this research work the literature review includes the …