CHAPTER ONE

1.0   INTRODUCTION

1.1   BACKGROUND OF THE STUDY.

Cost control is a vital instrument for the survival of any business organization. In furtherance of these however, similarities and dissimilarities would be examined and observation made.  The control of cost is very necessary to the successful operation of different business organization.  Business entity is set up as an economic institution with profit making as a primary business objective.  Achievement of profitability objectives is a concern of every business for no matter the argument for the pace of profitability in modern business it still remain the primary and the only measure of corporate efficiency and vehicle for survival in competitive are turbulent business environment.

To achieve this profitability objective, attempts are made by various business concerns to bring cost to its bearest minimum and the essence of this cost awareness has been further amplified by the current high cost of raw material are other production cost.

This project is set to investigate the effect of cost control on the profit of an organization with special reference to VIJU Industrial Nigeria Limited.

This topic will play a significant role in an organization especially manufacturing firms, cost control is established for the ultimate goal of profit making.

Profit making is an important goal that most organizations through the use of would need to achieve various organizational strategies; the best method is to control the cost through the use of budgeting and planning decision for cost control. Cost Accountant is not concerned simply with recording what actual cost was, but also:

Estimating what costs are expected to be in the future and Determining what cost should have been.

Generally, a cost is the value of economic resources used as a result of production or doing the thing cost. However, chartered institute of Management Accountants (CIMA) defined cost as ‘’the amount of expenditure (actual or national) incurred on or attributable to a specified thing or activity’’

Cost system used in one company may differ from one company to another depending on the organizational design and structures. Cost control refers to measures put in the place by management to monitor operations such that cost incurred do not deviate significantly from those pre-planned or expected.

Hence, cost control is an active concept which attempt to put in place adequate monitor to keep tract of cost behavior without a dent on the effectiveness of organization via such frugal outlook through a practical philosophy of most firm is to ensure adequate monitor is placed on sensitive cost components yet such philosophy in application got to give respect to the fact of organization composition to avoid system friction and dis-functional state.

Cost control implies the comparison of actual cost with standard cost (predetermine cost), then making a systematic investigation of deviation notices beyond an allowed range, though a scientific and tailored variance analysis.

Hence, for a control system to achieve desired objectives there is the need for planned programmed of cost monitor to actually collate data need for comparison. Essential techniques and complete appraisal to determine effectiveness, with predetermined targets.

If a business is to stay in operation then it must watch its cost and plan ahead of the financial year to guide it’s through so as to be able to appraise its result in the light of such estimates made ahead. The systematic approach ensuring perpetuity on the part of the Organization in financial planning with respect to cost control and profit. This act alone can aid management in attaining its objectives with less stress on the resources of the organization.

Furthermore, a firm especially manufacturing should be able to achieve its objective by minimizing the use of resources (prime cost in order to maximize the wealth.

Thus, managing, coordinating and control the effort of the firms for achieving the organization objectives.

1.2   STATEMENT OF THE PROBLEM

To study the problem which mitigate cost control on the profit of an organization? This problem will be tackled by looking at the following statement.

Does it reduce the unnecessarily high overheads and wastages?

Does inadequate cost control practices and its consequential increase in profit lead to shortage from expected target?

To what extent does inefficient and modernization of resources affect on companies and the entire Nigerian Economy.

Does the methods of controlling activities that increases the cost and being able to forecast profit cost and being able to actually possessing the skills to purse it through which can be said to be comparative ignorance of benefit accruing from such schemes.

The aim of this research study is to address these issues of cost control on the profit of an organization.

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