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The Effect of Production Cost Control in a Manufacturing Company

The Effect of Production Cost Control in a Manufacturing Company

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Reference ID: PS-166-TM


This research material titled “The Effect of Production Cost Control in a Manufacturing Company” is dedicated to God for his enabling grace, and to all computer enthusiasts who contributed to make life a pleasant experience during my research documentation.


I extend my sincere gratitude to all those who contributed to the completion of this project. Special thanks 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 or related project material on “The Effect of Production Cost Control in a Manufacturing Company” for their invaluable guidance, support, and expertise throughout the journey.

I am also grateful to your study area (mention any funding organizations, if applicable) for their financial assistance. This research would not have been possible without the encouragement and assistance of some stakeholders (mention any mentors, teachers, or colleagues). Additionally, I would like to acknowledge the understanding and patience of my family and friends during this endeavor. Your unwavering support has been a constant source of motivation. Thank you all for being part of this meaningful endeavor.

The Effect of Production Cost Control in a Manufacturing Company




  • 1.0 Introduction
  • 1.1 Background of the study
  • 1.2 Statement of the problem
  • 1.3 Objectives of the study
  • 1.4 Research questions
  • 1.5 Significance of the study
  • 1.6 Scope of the study
  • 1.7 Limitation of the study
  • 1.8 Definition of term


  • 2.0 Literature review
  • 2.1 Introduction
  • 2.2 Nature of cost accounting
  • 2.3 What cost control means
  • 2.4 The concept of cost control and cost minimization
  • 2.5 Steps involved in cost control
  • 2.6 The need for cost control strategies and techniques
  • 2.7 Cost control / cost minimization techniques and strategies worth study
  • 2.8 The nature and classification of cost


  • 3.0 Research methodology and design
  • 3.1 Introduction
  • 3.2 Research design
  • 3.3 Sources / methodology of data collection
  • 3.4 Population and sample size
  • 3.5 Sampling technique
  • 3.6 Validity and reliability of measuring instrument
  • 3.7 Method of data analysis


  • 4.0 Presentation and analysis of data
  • 4.1 Introduction
  • 4.2 Data presentation, classification and calculation
  • 4.3 Analysis of data
  • 4.4 Test of hypotheses
  • 4.5 Interpretation of result


  • 5.0 Summary, conclusion and recommendations
  • 5.1 Introduction
  • 5.2 Summary and findings
  • 5.3 Conclusion
  • 5.4 Recommendations




This study is designed to appraise the effect of production cost control in a manufacturing industry/company. The effect of cost control in a manufacturing industry is varied and highly challenging.

They are concerned with future planning and direct the operation and decision making and other financial plans, processing financial information falls within their areas of competence. For effective cost control, the company should practice process costing methods in it's true meanings.

This means that cost should be ascertained along the production process for adequate and effective cost control mechanism, this will go along way in reducing the production cost.

The Effect of Production Cost Control in a Manufacturing Company


1.0 Introduction

Manufacturing is the transformation of raw materials into finished goods through the use of labour and the factory facilities. It is clear from this point of view that currently the prices of raw materials are exorbitant to the extent that manufacturing industries are in a serious profit squeeze. They are struggling to maintain satisfactory earnings in a situation that increases are becoming more difficult to obtain even atleast proportional degree of cost.

Manufacturing companies whether sole proprietorship, corporation among others must have an objective and the primary objective of these company is to maximize profits. It therefore follows that for a company or organization to make profit, it must have control over the cost of it's production and services.

1.1 Background of the Study

It is paramount that the feature of every organization is in the pursuit of a goal(s) and objective and this target exists in different dimension. So to maintain the level of earning or to increase earnings following this situations, companies have to take drastic measures to control, if not reduce costs do away with waste and increase productivity at al ebbs.

This research work is conducted to see in general the effect of cost in a manufacturing industry and also to verify the discriminate increase in the price of commodities produced by companies which have attracted the attention of many citizens, especially those who know the applications of the continuous rise in price (inflation) on nation's economy in general. This rapid increase in price of manufactured goods can be attributed to the cost of production of goods and services and it is in light of this reason that the need for cost control rises.

This research work will therefore attempt to give a comprehensive account of the cost control in the field of manufacturing company with a particular emphasis on Longman furniture company Enugu.

In other words, the purpose of this study is to examine the various cost control measure being used in manufacturing company using Longman furniture company as a case study.

The consequence of these reasons is necessary because the industry/company involved in the manufacturing of many products faced with discriminate rise in price of their product which is attributed to the cost of production, when cost control is applied the product cost will be reduced.

1.2 Statement of the Problem

For sometimes, major discussions have been going on in government circles, among the members of the public and within private organizations about serious cost control. Some of these problem include:

  1. The discriminate increase in the price of commodity by companies
  2. Some manufacturing industries are in a serious profit squeeze, struggling to maintain satisfactory earnings.
  3. The rapid increase in price of manufactured goods as a result of high cost of production of goods and services.

1.3 Objective of the Study

The sole objectives of this study

  1. To examine the cost control system in operation at Longman furniture company Enugu.
  2. To evaluate them as to their effectiveness or otherwise
  3. To find out all the inherent deficiency
  4. To make recommendation for solving identified problems and possibly improved and undated any absolute techniques lines with recent trends.
  5. To find out the effect of cost control in the price of a product, growth of the firm and operating expenses.

1.4 Research Questions

  1. What are the main purpose of cost control in the manufacturing companies?
  2. What are the objectives of effects of cost control in the manufaction company?
  3. What procedures should be taken in cost control in manufacturing companies?
  4. What are the methods of costing in the manufacturing company?
  5. What are the techniques used in cost control in the manufacturing companies.

1.5 Significance of the Study

It is a fact that in all manufacturing company, cost of producing goods and services constitutes the major proportion of operating cost. Therefore for a manufacturing industry to survive, grow, pay it's workers and make a reasonable profit, the effective and efficient cost control by the management becomes very vital.

The assumption of studying the effects of cost control is that the result will help manufacturing companies to identify the exact problem affecting their cost of production.

For students who would research further on this topic, it will give them a clue on what goes on in the company, prepare their minds on some hardship to be encountered and also limit their research.

1.6 Scope of the Study

Although there are many manufacturing companies in existence in the country, but because it is not all that possible for research to cover them all, coupled with time and financial factor, this present study is designed to cover only one manufacturing industry, Longman furniture company Enugu.

It is believed that what is obtainable in Longman furniture company is used to represent other manufacturing companies.

1.7 Limitation of the Study

The researcher while trying to obtain information from respondents encountered certain draw backs which hindered data collection. The reluctance of some official to grant audience during the course of the study was a stumbling block in the way of an indepth course of the study.

Another problem and constraints against the successful conduct of the study is relating to inadequate finance, material and time resources together with low level of cooperation from the respondent in rendering vital information.

Finally the problem of conceptualization and also problems relating to the process of data collection pose a great limitation of the study.

1.8 Definition of Terms

Cost Centre:

A cost centre is a location, person or item in respect to which cost may be ascertained or related to.


The amount of expenditure 9actual or normal) incurred on or attributed to a specified thing or activity.


The ascertainment of cost


The monitoring of activities to see that organizational goals and objectives are achieved as planned. It is the measurement of the set out goal of a firm to achieve aim or objectives.


It is the transformation of material into finished goods through the use of labour and factory facilities.

Manufacturing Industry:

This is defined as an industry that turns primary products (raw material) into finished goods.

Budgetary Control:

This is the establishment of departmental budget relating the responsibilities of executives to the requirement of a policy and the continuous wither to secure by individual action, the objective of that policy or provide a firm basis for this revision.

Marginal Costing:

This is a costing technique which distinguishes between fixed costs and variable cost. Overhead: The cost incurred other than direct cost in the course of production activity.


Also known as stock, refers to the goods and materials that a business holds for the ultimate purpose of resale.

Prime Cost:

The addition of direct material, direct labour and direct expenses.


2.0 Literature Review

2.1 Introduction

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 …

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