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THE IMPACT OF STANDARD COSTING ON PROFITABILITY AND MANAGERIAL EFFECTIVENESS OF A MANUFACTURING INDUSTRY

ABSTRACT

This research work will treat in detail the impact of standard costing on profitability and managerial effectiveness of a manufacturing industry.  It will also take into account what standard cost does and the check it provides or control such that exceptional profit oriented goal performance can be achieved and on the reverse, adequate punishment to be exercised for bad performance. Chapter one of this work is going to discuss the brief history of the case under study, statement of the problem, purpose of study, significance of the problem, scope of the study, limitations of the study, assumption of the study. In Chapter two, the researcher will deliberate on the standard costing and overview, characteristics of standard costing, advantages and disadvantages of standard costing, essential features of standard costing, standard cost card, types of standard costing, setting standard, revision of standard etc and the areas standard costing helps in improving management efficiency. Chapter three will consider design and methodology, selection of data and analysis, presentation and data analysis, test of hypothesis and interpretation of result. Finally, chapter five will contain the summary of findings, conclusion from the study, recommendations and suggestions for further research.

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

The impact of standard costing on profitability and managerial effectiveness of a manufacturing industry.  The standard costing as a tool for either improves or not improving profitability and managerial effectiveness.  Unlike its contemporaries in the field of science, it deals with human beings and calculating significant information.  Standard costing as a long established concept is the management function of planning and control. In effect, yardstick has been of vital importance for planning and control exercise. As a matter of facts, problems associated with production and earning a profit was recognized for many years before the concept of standard costing was invented.One of the earlier attempt at costing was by James Dodson.  He showed how the books were kept by a shoemaker ranging from this period onwards, there was a steady development of costing developed in the time of our early scientific management proponents such as Fredrick W. Taylor, Henry Fayol and others.

These standards cost reveal goals, spur actions and efforts for effective management and equally provide checks such that exceptional profit oriented goal performance can be achieved and the reverse adequate punishment to be exercised for bad performance. Standard costs cause appraisal to be made over production facilities and form management intentions and capabilities and is a first step strength and weakness appraisal. These led to the preference of standard costing to other method.  With the development of standard costing system in 1920s, it was brought into the accounting system such that total variances might be accumulated as well as detailed variances.  These steps gave rise to formal expression that significant costs were not actual and historical cost but standard or planning costs and their variances.

1.1    BRIEF HISTORICAL BACKGROUNDS

Ferdinand Industries Nigeria Ltd is a company used in this study. This company is located at Urualla in Ideato North Local Government Area of Imo State of Nigeria.

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